As filed with the Securities and Exchange Commission on September 16,1997
Registration No. 333-___________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SYMONS INTERNATIONAL GROUP, INC. SIG CAPITAL TRUST I
(Exact name of Registrant as (Exact name of Registrant as specified
specified in its charter) in its trust agreement)
INDIANA DELAWARE
(State or other jurisdiction of ) (State or other jurisdiction of
incorporation or organization) incorporation or organization)
6331 6331
(Primary Standard Industrial (Primary Standard Industrial Classifi-
Classification Code Number) cation Code Number)
35-1707115 35-6650328
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
4720 KINGSWAY DRIVE
INDIANAPOLIS, INDIANA 46205
(317) 259-6300
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
DAVID L. BATES, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
SYMONS INTERNATIONAL GROUP, INC.
4720 KINGSWAY DRIVE
INDIANAPOLIS, INDIANA 46205
(317) 259-6300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
ROBERT A. ROSE, ESQ.
DANN PECAR NEWMAN & KLEIMAN, P.C.
2300 One American Square, Box 82008
Indianapolis, Indiana 46282
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) FEE (2) (3)
Trust Preferred Securities of SIG Capital
Trust I . . . . . . . . . . . . . . . . . . . . . . .$135,000,000 100% $135,000,000 $40,909
Senior Subordinated Notes of Symons
International Group, Inc.(2)
Symons International Group, Inc. Guarantee
with respect to Trust Preferred Securities(3)
Total . . . . . . . . . . . . . . . . . . . . . . . $135,000,000(4) 100% $135,000,000(5) $40,909
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the Senior Subordinated Notes
of Symons International Group, Inc. distributed upon any liquidation of SIG
Capital Trust I.
(3) No separate consideration will be received for the Symons International
Group, Inc. Guarantee.
(4) This Registration Statement is deemed to cover rights of holders of Senior
Subordinated Notes under an Indenture, the rights of holders of Trust
Preferred Securities of the SIG Capital Trust I under the Amended and
Restated Declaration of Trust, the rights of holders of such Trust Preferred
Securities under a Guarantee and certain backup undertakings as described
herein.
(5) Such amount represents the Liquidation Amount of the SIG Capital Trust I
Preferred Securities to be exchanged hereunder and the principal amount of
Senior Subordinated Notes that may be distributed to holders of such Trust
Preferred Securities upon any liquidation of the SIG Capital Trust I.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Subject to Completion, Dated September 16, 1997
SIG CAPITAL TRUST I
OFFER TO EXCHANGE ITS
9 1/2% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
9 1/2% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
SYMONS INTERNATIONAL GROUP, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED
------------------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 23 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER PREFERRED SECURITIES IN THE
EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------
SIG Capital Trust I, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus (as the same may be
amended or supplemented from time to time, the "Prospectus") and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $135,000,000 aggregate Liquidation Amount of its 9
1/2% Trust Preferred Securities (the "Exchange Preferred Securities") which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of its outstanding
9 1/2% Trust Preferred Securities (the "Preferred Securities"), of which
$135,000,000 aggregate Liquidation Amount is outstanding. Pursuant to the
Exchange Offer, Symons International Group, Inc., an Indiana corporation (the
"Company"), is also offering to exchange (i) its guarantee of payments of cash
distributions and payments on liquidation of the Trust or redemption of the
Preferred Securities (the "Company Guarantee") for a like guarantee in respect
of the Exchange Preferred Securities (the "Exchange Guarantee") and (ii) all of
its 9 1/2% Senior Subordinated Notes due August 15, 2027 (the "Old Senior
Subordinated Notes") for a like aggregate principal amount of its 9 1/2% Senior
Subordinated Notes due August 15, 2027 (the "Exchange Notes"), which Exchange
Guarantee and Exchange Notes also have been registered under the Securities Act.
The Preferred Securities, the Company Guarantee and the Old Senior Subordinated
Notes are collectively referred to herein as the "Old Securities" and the
Exchange Preferred Securities, the Exchange Guarantee and the Exchange Notes are
collectively referred to herein as the "Exchange Securities."
The terms of the Exchange Securities are identical in all material
respects to the respective terms of the Old Securities, except that (i) the
Exchange Securities have been registered under the Securities Act and therefore
will not be subject to certain restrictions on transfer applicable to the Old
Securities, (ii) the Exchange Preferred Securities will not contain the $100,000
minimum Liquidation Amount transfer restriction, (iii) the Exchange Preferred
Securities will not provide for any increase in the Distribution rate thereon,
(iv) the Exchange Notes will not contain the $100,000 minimum principal amount
transfer restriction and (v) the Exchange Notes will not provide for any
increase in the interest rate thereon. See "Description of Exchange Preferred
Securities" and "Description of Old Securities." The Exchange Securities are
being offered for exchange in order to satisfy certain obligations of the
Company and the Trust under the Registration Rights Agreement dated as of August
12, 1997 (the "Registration Rights Agreement") among the Company, the Trust and
the Initial Purchasers (as defined herein). In the event that the Exchange Offer
is consummated, any Preferred Securities which remain outstanding after
consummation of the Exchange Offer and the Exchange Preferred Securities issued
in the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Declaration (as defined herein).
This Prospectus and the Letter of Transmittal are first being mailed to
all holders of Preferred Securities on September , 1997.
The date of this Prospectus is September , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
information may also be accessed electronically by means of the Commission's
home page on the Internet (http://www.sec.gov).
No separate financial statements of the Trust have been included
herein. The Company and the Trust do not consider that such financial statements
would be material to holders of the Preferred Securities or Exchange Preferred
Securities because the Trust is a newly formed special purpose entity, has no
operating history or independent operations and is not engaged in and does not
propose to engage in any activity other than holding as trust assets the
Exchange Notes and issuing the Trust Securities. See "SIG Capital Trust I" and
"Description of Exchange Preferred Securities." In addition, the Company does
not expect that the Trust will file reports under the Exchange Act with the
Commission.
This Prospectus constitutes a part of a registration statement on Form
S-4 (the "Registration Statement") filed by the Company and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company, the Trust
and the Exchange Preferred Securities. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
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The Exchange Preferred Securities and the Preferred Securities
(collectively, the "Securities") represent beneficial interests in the assets of
the Trust. The Company is the owner of all of the beneficial interests
represented by common securities of the Trust (the "Common Securities," and
together with the Securities, the "Trust Securities"). Wilmington Trust Company
is the Preferred Trustee of the Trust. The Trust exists for the sole purpose of
issuing the Trust Securities and investing the proceeds thereof in the Exchange
Notes (as defined herein). The Exchange Notes will mature on August 15, 2027
(the "Stated Maturity Date"). The Securities will have a preference over the
Common Securities under certain circumstances with respect to cash distributions
and amounts payable on liquidation, redemption or otherwise. See "Description of
Exchange Preferred Securities."
As more fully described herein, the Company has entered into several
contractual undertakings which, the Company believes, taken together, guarantee
to the holders of the Exchange Preferred Securities a full and unconditional
right to enforce the payment of the distributions with respect to the Exchange
Preferred Securities, the payment of the redemption price upon redemption of the
Exchange Preferred Securities and the payment of the Liquidation Amount with
respect to the Exchange Preferred Securities upon liquidation of the Trust. See
"Risk Factors -- Rights Under the Exchange Guarantee." Those contractual
arrangements include the Company's obligations under (i) the Exchange Guarantee,
(ii) the Declaration, (iii) the Exchange Notes and (iv) the Indenture. As used
herein, (i) the "Indenture" means the Senior Subordinated Indenture, dated as of
August 12, 1997, as amended and supplemented from time to time, between the
Company and Wilmington Trust Company, as Indenture Trustee (the "Indenture
Trustee"), (ii) the "Declaration" means the Amended and Restated Declaration of
Trust relating to the Trust, dated as of August 12, 1997, among the Company, as
Sponsor, Wilmington Trust Company as Preferred Trustee (the "Preferred
Trustee"), Wilmington Trust Company, as Delaware Trustee (the "Delaware
Trustee"), and the Company Trustees named therein (collectively, with the
Preferred Trustee and the Delaware Trustee, the "Issuer Trustees"). In addition,
as the context may require, unless otherwise expressly stated, (i) the term
"Securities" includes the Preferred Securities and the Exchange Preferred
Securities, (ii) the term "Trust Securities" includes the Securities and the
Common Securities, (iii) the term "Senior Subordinated Notes" includes the Old
Senior Subordinated Notes and the Exchange Notes and (iv) the term "Guarantee"
includes the Company Guarantee and the Exchange Guarantee.
Holders of the Exchange Preferred Securities will be entitled to
receive preferential cumulative cash distributions arising from the payment of
interest on the Exchange Notes, accruing from August 12, 1997, and payable
semi-annually in arrears on February 15 and August 15 of each year, commencing
February 15, 1998, at the annual rate of 9 1/2% of the Liquidation Amount of
$1,000 per Exchange Preferred Securities ("Distributions").
Unless an Event of Default has occurred and is continuing, the Company
will have the right under the Indenture at any time during the term of the
Exchange Notes to defer the payment of interest at any time or from time to time
for a period not exceeding ten consecutive semi-annual periods with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity Date. As a consequence of any such deferral, semi-annual
Distributions on the Securities by the Trust will be deferred during any such
Extension Period. At the end of an Extension Period, the Company must pay all
interest then accrued and unpaid (together with interest then accrued at the
annual rate of 9 1/2%, compounded semi-annually, to the extent permitted by
applicable law). During an Extension Period, interest will continue to accrue
and holders of Exchange Notes (and holders of the Trust Securities while Trust
Securities are outstanding) will be required to accrue interest income (in the
form of OID) for United States federal income tax purposes prior to the receipt
of cash attributable to such income. See "Certain United States Federal Income
Tax Considerations -- Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's Capital Stock (which
includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu in all respects with or junior in
interest to the Exchange Notes or (iii) make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any Subsidiary of the
Company if such guarantee ranks pari passu with or junior in right of payment to
the Exchange Notes (other than (a) dividends or distributions in shares of or
options, warrants or rights to subscribe for or purchase shares of, Common Stock
of the Company, (b) any declaration of a dividend in connection with the
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<PAGE>
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of the Company's Capital Stock or the exchange or conversion of
one class or series of the Company's Capital Stock for another class or series
of the Company's Capital Stock, (e) the purchase of fractional interests in
shares of the Company's Capital Stock pursuant to the conversion or exchange
provisions of such Capital Stock or the security being converted or exchanged
and (f) purchases or issuances of Common Stock under any of the Company's stock
option, stock purchase, stock loan or other benefit plans for its directors,
officers or employees or any of the company's dividend reinvestment plans, in
each case as now existing or hereafter established or amended).
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed ten consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company must give the Preferred Trustee
and Indenture Trustee notice of its election of any Extension Period (or an
extension thereof) at least five Business Days prior to the earlier of (i) the
date the Distributions on the Securities would have been payable except for the
election to begin or extend such Extension Period or (ii) the date the Trustees
are required to give notice to any securities exchange or to holders of Trust
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record Date. The
Indenture Trustee shall give notice of the Company's election to begin or extend
a new Extension Period to the holders of the Securities. There is no limitation
on the number of times that the Company may elect to begin an Extension Period.
Through the Guarantee, the guarantee agreement of the Company relating
to the Common Securities (the "Common Guarantee"), the Declaration, the Senior
Subordinated Notes and the Indenture, taken together, the Company has guaranteed
or will guarantee, as the case may be, fully, irrevocably and unconditionally,
all of the Trust's obligations under the Trust Securities. See "Relationship
Among the Exchange Preferred Securities, the Declaration, the Exchange Notes and
the Exchange Guarantee -- Full And Unconditional Guarantee." The Company
Guarantee and the Common Guarantee guarantees, and the Exchange Guarantee will
guarantee, payments of Distributions and payments on liquidation or redemption
of the Trust Securities, but in each case only to the extent that the Trust
holds funds on hand legally available therefor and has failed to make such
payments, as described herein. See "Description of Exchange Preferred Securities
- -- Description of Exchange Guarantee." If the Company fails to make a required
payment on the Senior Subordinated Notes, the Trust will not have sufficient
funds to make the related payments, including Distributions, on the Trust
Securities. The Guarantee and the Common Guarantee will not cover any such
payment when the Trust does not have sufficient funds on hand legally available
therefor. In such event, a holder of Securities may institute a legal proceeding
directly against the Company to enforce its rights in respect of such payment.
See "Description of Exchange Preferred Securities -- Description of Exchange
Notes -- Enforcement Rights of Holders of Exchange Preferred Securities." The
obligations of the Company under the Guarantee, the Common Guarantee and the
Senior Subordinated Notes will be subordinate and junior in right of payment to
all Senior Indebtedness (as defined in "Description of Exchange Preferred
Securities -- Description of Exchange Notes").
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Senior Subordinated Notes at a redemption price equal
to the principal amount of, plus accrued interest on, the Senior Subordinated
Notes (the "Maturity Redemption Price"), (ii) in whole or in part, on or after
August 15, 2007, contemporaneously with the optional prepayment by the Company
of the Senior Subordinated Notes, at a redemption price equal to the Optional
Prepayment Price (as defined below) (the "Optional Redemption Price"), (iii)
upon the occurrence of a Change of Control Triggering Event (as defined herein)
at a redemption price equal to 101% of the principal amount, of any Senior
Subordinated Notes received in exchange for Trust Securities plus any accrued
and unpaid interest thereon (the "Change of Control Redemption Price") or (iv)
in whole upon acceleration of the Senior Subordinated Notes upon the occurrence
of an Event of Default at a redemption price equal to the principal amount of,
plus accrued interest on, the Senior Subordinated Notes (the "Default Redemption
Price").
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Further, the Trust Securities are subject to redemption at the option
of the Company in a Like Amount upon the occurrence of a Tax Event (as defined
herein) in certain circumstances at a redemption price equal to the principal
amount of, plus accrued interest on, the Senior Subordinated Notes (the "Event
Redemption Price"). Any of the Maturity Redemption Price, the Change of Control
Redemption Price, the Default Redemption Price, the Event Redemption Price or
the Optional Redemption Price may be referred to herein as the "Redemption
Price." See "Description of Exchange Preferred Securities."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Senior Subordinated Notes to be paid in accordance with their terms
and (ii) with respect to a distribution of Senior Subordinated Notes upon the
liquidation of the Trust, Senior Subordinated Notes having a principal amount
equal to the Liquidation Amount of the Trust Securities of the holder to whom
such Senior Subordinated Notes are distributed.
The Exchange Notes will be prepayable prior to the Stated Maturity Date
at the option of the Company (i) on or after August 15, 2007, in whole or in
part, at a prepayment price (the "Optional Prepayment Price") equal to the
principal amount thereof outstanding, plus accrued interest thereon to the date
of prepayment or (ii) at any time, in whole but not in part, upon not less than
thirty or more than sixty days' notice, at the Redemption Prices (as defined in
the Indenture) (expressed as a percentage of principal amount) set forth below
plus accrued and unpaid interest to the Redemption Date (as defined in the
Indenture) (subject to the right of holders of record on the relevant Regular
Record Date (as defined in the Indenture) to receive interest due on an Interest
Payment Date that is on or prior to the Redemption Date) if redeemed during the
twelve-month period beginning on August 15 of the years indicated below:
Percentage of
Year Principal Amount
2007...............................................................104.750%
2008...............................................................103.167%
2009...............................................................101.583%
2010 and thereafter................................................100.000%
Either of the Optional Prepayment Price or the Change of Control Redemption
Price may be referred to herein as the "Prepayment Price." See "Description of
Exchange Preferred Securities."
The Company will have the right at any time to terminate the Trust and
cause a Like Amount of the Senior Subordinated Notes to be distributed to the
holders of the Trust Securities in liquidation of the Trust, subject to the
Company having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Trust Securities. Unless
the Senior Subordinated Notes are distributed to the holders of the Trust
Securities, in the event of a liquidation of the Trust as described herein,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, the holders of Trust Securities generally will be entitled to
receive a Liquidation Amount of $1,000 per Trust Security plus accumulated
Distributions thereon to the date of payment. See "Description of Exchange
Preferred Securities."
Based on existing interpretations of the Securities Act by the staff of
the Division of Corporate Finance of the Commission ("Staff") set forth in
several no-action letters to third parties, and subject to the immediately
following sentence, the Company and the Trust believe that the Exchange
Preferred Securities, Exchange Guarantee and Exchange Notes issued pursuant to
the Exchange Offer may be offered for resale, resold and otherwise transferred
by the holders thereof (other than holders who are broker-dealers) without
further compliance with the registration and prospectus delivery provisions of
the Securities Act. However, any purchaser of Preferred Securities who is an
affiliate of the Trust or the Company or who intends to participate in the
Exchange Offer for the purpose of distributing the Exchange Preferred
Securities, or any broker-dealer who purchased the Preferred Securities from the
Trust to resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (i) will not be able to rely on the interpretation of the Staff
set forth in the above-mentioned no-action letters, (ii) will not be entitled to
tender its Preferred Securities
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in the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Preferred Securities unless such sale or transfer is made
pursuant to an exemption from such requirements. Neither the Company nor the
Trust intends to seek its own no-action letter and there can be no assurance
that the Staff would make a similar determination with respect to the Exchange
Preferred Securities, Exchange Guarantee and Exchange Notes as it has in such
no-action letters to third parties.
Each holder of the Preferred Securities (other than certain specified
holders) who wishes to exchange the Preferred Securities for Exchange Preferred
Securities in the Exchange Offer will be required to represent that (i) it is
not an affiliate of the Trust or the Company, (ii) the Exchange Preferred
Securities to be received by it were acquired in the ordinary course of its
business and (iii) at the time of the Exchange Offer, it has no arrangement with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Preferred Securities. In addition, in connection
with any resales of Exchange Preferred Securities, any broker-dealer (a
"Participating Broker- Dealer") who acquired the Exchange Preferred Securities
for its own account as a result of market-making or other trading activities
must deliver a prospectus meeting the requirements of the Securities Act. The
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to the Exchange Preferred
Securities (other than a resale of an unsold allotment from the original sale of
the Preferred Securities) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Rights Agreement, the Trust is
required to allow Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such Exchange Preferred Securities.
In that regard, each Participating Broker-Dealer who surrenders
Preferred Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that, upon receipt of notice
from the Company or the Trust of the occurrence of any event or the discovery of
any fact which makes any statement contained or incorporated by reference in
this Prospectus untrue in any material respect or which causes this Prospectus
to omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of Exchange Preferred Securities (or the
Exchange Guarantee or the Exchange Notes, as applicable) pursuant to this
Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Company or the Trust has given notice that the sale of the Exchange
Preferred Securities (or the Exchange Guarantee or the Exchange Notes, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the Exchange Preferred Securities (or
the Exchange Guarantee or the Exchange Notes, as applicable) it shall extend the
90-day period referred to above during which Participating Broker-Dealers are
entitled to use this Prospectus in connection with the resale of Exchange
Preferred Securities by the number of days during the period from and including
the date of the giving of such notice to and including the date when
Participating Broker- Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the Exchange Preferred
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of the Exchange Preferred Securities (or the Exchange
Guarantee or the Exchange Notes, as applicable) may be resumed, as the case may
be.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Preferred Securities. The Exchange Preferred
Securities will be a new issue of securities for which there currently is no
market. Although the Initial Purchasers have informed the Company and the Trust
that they each currently intend to make a market in the Exchange Preferred
Securities, they are not obligated to do so, and any such market-making may be
discontinued at any time without notice. Accordingly, there can be no assurance
as to the development or liquidity of any market for the Exchange Preferred
Securities. The Company and the Trust currently do not intend to apply for
listing of the Exchange Preferred Securities on any securities exchange or for
quotation through the NASDAQ Stock Market.
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Any Preferred Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the Declaration
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the holders of Preferred
Securities will continue to be subject to all of the existing restrictions upon
transfer thereof and neither the Company nor the Trust will have any further
obligation to such holders (other than under certain limited circumstances) to
provide for registration under the Securities Act of the Preferred Securities
held by them. To the extent that Preferred Securities are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Preferred
Securities could be adversely affected. See "Risk Factors -- Consequences of a
Failure to Exchange Preferred Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF PREFERRED SECURITIES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR PREFERRED SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Preferred Securities may be tendered for exchange on or prior to 5:00 p.m.,
New York City time, on , 1997 (such time on such date being hereinafter called
the "Expiration Date"), unless the Exchange Offer is extended by the Company or
the Trust (in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended). Tenders of Preferred
Securities may be withdrawn at any time on or prior to the Expiration Date. The
Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Preferred Securities being tendered for exchange. However, the Exchange Offer is
subject to certain events and conditions which may be waived by the Company or
the Trust and to the terms and provisions of the Registration Rights Agreement.
Preferred Securities may be tendered in whole or in part having an aggregate
Liquidation Amount of not less than $100,000 (100 Preferred Securities) or any
integral multiple of $1,000 Liquidation Amount (one Preferred Security) in
excess thereof. The Company will pay all fees, expenses, debts and obligations
(other than the Trust Securities) related to the Trust and the offering and
exchange of the Preferred Securities and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of the Trust. See "The Exchange Offer --
Fees and Expenses." Holders of the Preferred Securities whose Preferred
Securities are accepted for exchange will not receive Distributions on such
Preferred Securities and will be deemed to have waived the right to receive any
Distributions on such Preferred Securities accumulated from and after August 12,
1997. See "The Exchange Offer -- Distributions of Exchange Preferred
Securities."
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the Exchange Preferred Securities offered hereby. No dealer-manager
is being used in connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
------------------------------------
7
<PAGE>
TABLE OF CONTENTS
Page
Available Information..................................................... 2
Prospectus Summary........................................................ 9
Risk Factors.............................................................. 23
Use of Proceeds........................................................... 37
Accounting Treatments..................................................... 37
Capitalization............................................................ 38
Unaudited Pro Forma Consolidated Financial Statements..................... 39
Selected Consolidated Financial Data of the Company....................... 45
Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company...................... 50
Selected Consolidated Historical Financial Data of
Superior Insurance Company.............................................. 60
Management's Discussion and Analysis of Financial Condition
and Results of Operations of Superior Insurance Company.................. 61
Business.................................................................. 67
The Exchange Offer........................................................ 99
Description of Exchange Preferred Securities.............................. 109
Description of the Exchange Notes......................................... 122
Description of Exchange Guarantee......................................... 142
Relationship Among the Exchange Preferred Securities,
the Declaration, the Exchange Notes and the Exchange Guarantee.......... 146
Description of Old Securities............................................. 148
Certain United States Federal Income Tax Considerations................... 149
ERISA Considerations...................................................... 154
Plan of Distribution...................................................... 155
Legal Matters............................................................. 156
Experts................................................................... 156
Glossary of Terms......................................................... 157
Index to Financial Statements............................................. F-1
8
<PAGE>
PROSPECTUS SUMMARY
See "Glossary of Terms" ("Glossary") for the definitions of certain of the
capitalized and defined terms used herein.
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and consolidated financial statements, and
the notes thereto, appearing elsewhere in this Prospectus. Unless the context
indicates otherwise, (i) the "Company" or "SIG" refers to Symons International
Group, Inc., an Indiana corporation, and its Subsidiaries, (ii) the
"Subsidiaries" refer to the direct and indirect subsidiaries of the Company,
(iii) the "Insurers" refer to IGF Insurance Company, an Indiana property and
casualty insurance company and a wholly owned subsidiary of the Company ("IGF"),
and through the Company's ownership of GGS Management Holdings, Inc. ("GGS
Holdings"), Pafco General Insurance Company, an Indiana property and casualty
insurance company ("Pafco"), and Superior Insurance Company, a Florida property
and casualty insurance company, together with its subsidiaries ("Superior") and
(iv) "Goran" refers to Goran Capital Inc. and its subsidiaries, other than the
Company and the Subsidiaries.
Unless otherwise indicated, (i) all data in this Prospectus takes into
effect the 7,000-for-1 stock split of the Company's Common Stock prior to its
Initial Public Offering in November 1996 and (ii) all financial information and
operating statistics applicable to the Company, set forth in this Prospectus are
based on generally accepted accounting principles ("GAAP") and not statutory
accounting practices ("SAP"). In conformity with industry practice, data derived
from A.M. Best Company, Inc. ("A.M. Best") and the National Association of
Insurance Commissioners ("NAIC"), generally used herein for industry
comparisons, are based on SAP.
SIG Capital Trust I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Declaration executed by the Company, as Sponsor, Wilmington Trust
Company, as Preferred Trustee and Wilmington Trust Company, as Delaware Trustee,
and the three individual Company Trustees named therein and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on August 4, 1997. The
Trust's business and affairs are conducted by the Issuer Trustees: the Preferred
Trustee, the Delaware Trustee and the three Company Trustees who are employees
or officers of or affiliated with the Company. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using
the proceeds from the sale of the Trust Securities to acquire the Senior
Subordinated Notes issued by the Company and (iii) engaging in only those other
activities necessary, advisable or incidental thereto (such as registering the
transfer of the Trust Securities). Accordingly, the Senior Subordinated Notes
will be the sole assets of the Trust, and payments under the Senior Subordinated
Notes will be the sole revenues of the Trust. All of the Common Securities are
owned by the Company.
The Company
Overview
Symons International Group, Inc., a specialty property and casualty
insurer, underwrites and markets nonstandard private passenger automobile
insurance and crop insurance. Through its Subsidiaries, the Company writes
business in the United States exclusively through independent agencies and seeks
to distinguish itself by offering high quality, technology-based services for
its agents and policyholders. The Company had consolidated Gross Premiums
Written of approximately $305.5 million and $279.1 million for the twelve months
ended December 31, 1996 and the six months ended June 30, 1997, respectively.
The Company believes that, based on the Company's Gross Premiums Written in
1996, it is the twelfth largest underwriter of nonstandard automobile insurance
in the United States. Based on premium information compiled in 1996 by the
National Crop Insurance
9
<PAGE>
Services, Inc. ("NCIS"), the Company believes that IGF is the fifth largest
underwriter of Multi-Peril Crop Insurance ("MPCI") in the United States.
The Company generated EBITDA of $29.8 million and $21.2 million for the
twelve months ended December 31, 1996 and the six months ended June 30, 1997,
respectively. The Company's nonstandard automobile business and crop businesses
are operated autonomously and, as a result, are not dependent on one another nor
are they impacted by similar events. In the first half of 1997, the nonstandard
automobile business and crop business accounted for approximately 36.9% and
63.1% of the Company's EBITDA, respectively. Through a disciplined underwriting
philosophy, the Company has generated Combined Ratios of 93.4% and 98.3% for the
twelve months ended December 31, 1996 and six months ended June 30, 1997,
respectively.
The Company markets its nonstandard automobile business through
approximately 6,000 independent agents in eighteen states. Nonstandard insureds
are those individuals who are unable to obtain insurance through standard market
carriers due to factors such as poor premium payment history, driving
experience, record of prior accidents or driving violations, particular
occupation or type of vehicle. Premium rates for nonstandard risks are higher
than for standard risks. Nonstandard policies have relatively short coverage
periods and low limits of liability. According to A.M. Best, the nonstandard
automobile market accounted for $17.4 billion in premiums in 1995. The
nonstandard automobile market is the fastest growing sector of the personal
lines market resulting primarily from (i) the increased regulatory pressure on
previously uninsured motorists to purchase insurance and (ii) the increasing
number of young adults reaching driving age. The Company's nonstandard
automobile insurance business generated $187.2 million and $165.5 million of
Gross Premiums Written and had Combined Ratios of 98.8% and 99.3% for the twelve
months ended December 31, 1996 and the six months ended June 30, 1997,
respectively.
The Company also underwrites MPCI, crop hail insurance and other named
peril crop insurance policies through approximately 1,200 independent agencies
in 39 states. MPCI, a federally subsidized program, is designed to provide
farmers who suffer an insured crop loss due to the weather or other natural
perils with the funds needed to continue operations and plant crops for the next
growing season. For the year ended December 31, 1996, the Company wrote
approximately $82.1 million in MPCI premiums and $28.0 million in crop hail
gross premiums. For the first six months of 1997, the Company wrote
approximately $79.0 million in MPCI premiums and $29.3 million in crop hail
gross premiums. In addition to premium revenues, for 1996, the Company received
from the Federal Crop Insurance Corporation ("FCIC"): (i) CAT Coverage Fees in
the amount of $1.2 million, (ii) Buy-up Expense Reimbursement Payments in the
amount of $25.0 million and (iii) CAT LAE Reimbursement Payments and MPCI Excess
LAE Reimbursement Payments in the aggregate amount of $5.8 million. See
"Management's Discussion and Analysis -- Certain Accounting Policies for Crop
Insurance Operations."
As of June 30, 1997, 75.5% of the Company's investment portfolio was
invested in fixed maturities, of which 87.3% had ratings of "A" or equivalent or
better and 97.6% had ratings of "BBB" or equivalent or better.
Company Strategy
The Company employs separate operating strategies for its nonstandard
automobile and crop insurance businesses.
Nonstandard Automobile Insurance Business
o The Company seeks to achieve profitability through a combination of
internal growth and the acquisition of other insurers and blocks of
business. The Company regularly evaluates acquisition opportunities.
10
<PAGE>
o The Company seeks to expand the multi-tiered marketing approach currently
employed in certain states in order to offer to its independent agency
network a broader range of products with different premium and commission
structures.
o The Company is committed to the use of integrated technologies which
permit it to rate, issue, bill and service policies in an efficient and
cost effective manner.
o The Company competes primarily on the basis of underwriting criteria and
service to agents and insureds and generally does not match price decreases
implemented by competitors which are directed towards obtaining market
share.
o The Company encourages agencies to place a large share of their
profitable business with its Subsidiaries by offering, in addition to fixed
commissions, a contingent commission based on a combination of volume and
profitability.
o The Company responds to claims in a manner designed to reduce the costs
of claims settlements by reducing the number of pending claims and uses
computer databases to verify repair and vehicle replacement costs and to
increase subrogation and salvage recoveries.
Crop Insurance Business
o The Company seeks to enhance underwriting profits and reduce the
volatility of its crop insurance business through geographic
diversification and the appropriate allocation of risks among the federal
reinsurance pools and the effective use of federal and third-party
catastrophic reinsurance arrangements.
o The Company also limits the risks associated with crop insurance through
selective underwriting of crop risks based on its historical loss
experience data base.
o The Company continues to develop and maintain a proprietary
knowledge-based underwriting system which utilizes a database of
Company-specific underwriting rules.
o The Company has further strengthened its independent agency network by
using technology to provide fast, efficient service to its agencies and
providing application documentation designed for simplicity and
convenience.
o Unlike many of its competitors, the Company employs approximately 85
full-time claims adjusters, most of whom are agronomy trained, to reduce
the Losses experienced by IGF.
o The Company stops selling its crop hail policies after certain selected
dates to prevent farmers from adversely selecting against IGF by purchasing
crop insurance when a storm is forecast or hail damage has already
occurred.
o The Company continues to explore growth opportunities and product
diversification through new specialty coverages, including Crop Revenue
Coverage and named peril insurance.
o The Company continues to explore new opportunities in administrative
efficiencies and product underwriting made possible by advances in
precision farming software, Global Positioning System (GPS) software and
Geographical Information System (GIS) technology, all of which continue to
be adopted by insureds in their farming practices.
11
<PAGE>
Company Structure
In April 1996, the Company acquired Superior from Fortis, Inc., through GGS
Management Holdings, Inc. ("GGS Holdings"), which is 100% owned by the Company.
The following chart shows the current organizational structure of the Company
with all Subsidiaries being 100% directly or indirectly owned by the Company.
SYMONS INTERNATIONAL
GROUP, INC.
("SIG" or the "Company")
-----------
|
|-----100%-------------------|---------------100%---------|
| |
IGF HOLDINGS, INC. GGS MANAGEMENT
("IGF Holdings") HOLDINGS, INC.
- ----------------- ("GGS Holdings")
| ----------------
| |
| |
IGF INSURANCE GGS MANAGEMENT, INC.
COMPANY ("GGS Management")
("IGF") ------------------
------- |
|
|---------------------------------------|
| |
PAFCO GENERAL SUPERIOR INSURANCE
INSURANCE COMPANY COMPANY
("Pafco") ("Superior")
--------- ------------
The address and telephone number of the Company's principal executive
offices are 4720 Kingsway Drive, Indianapolis, Indiana 46205, (317) 259-6300.
12
<PAGE>
The Exchange Offer
The Exchange Offer Up to $135,000,000 aggregate Liquidation Amount of Exchange
Preferred Securities are being offered in exchange for a
like aggregate Liquidation Amount of Preferred Securities.
Preferred Securities may be tendered for exchange in whole
or in part in a Liquidation Amount of $100,000 (100
Preferred Securities) or any integral multiple of $1,000
(one Preferred Security) in excess thereof. The Company and
the Trust are making the Exchange Offer in order to satisfy
their obligations under the Registration Rights Agreement
relating to the Preferred Securities. For a description of
the procedures for tendering Preferred Securities, see "The
Exchange Offer-- Procedures for Tendering Preferred
Securities."
Expiration Date 5:00 p.m., New York City time, on __________________, 1997,
unless the Exchange Offer is extended by the Company or the
Trust (in which case the Expiration Date will be the latest
date and time to which the Exchange Offer is extended). See
"The Exchange Offer-- Terms of the Exchange Offer."
Conditions to the The Exchange Offer is subject to certain onditions, which
Exchange Offer may be waived by the Company and the Trust in their sole
discretion. The Exchange Offer is not conditioned upon any
minimum Liquidation Amount of Preferred Securities being
tendered. See "The Exchange Offer -- Conditions to the
Exchange Offer."
Offer The Company and the Trust reserve the right in their sole
and absolute discretion, subject to applicable law, at any
time and from time to time, (i) to delay the acceptance of
the Preferred Securities for exchange, (ii) to terminate the
Exchange Offer if certain specified conditions have not been
satisfied and (iii) to extend the Expiration Date of the
Exchange Offer and retain all Preferred Securities tendered
pursuant to the Exchange Offer, subject, however, to the
right of holders of Preferred Securities to withdraw their
tendered Preferred Securities. See "The Exchange Offer--
Terms of the Exchange Offer."
Withdrawal Rights Tenders of Preferred Securities may be withdrawn at any time
on or prior to the Expiration Date by delivering a written
notice of such withdrawal to the Exchange Agent in
conformity with certain procedures set forth below under
"The Exchange Offer-- Withdrawal Rights."
Procedures for Tendering holders of Preferred Securities must complete and
Tendering sign a Letter of Transmittal in accordance with the
Preferred instructions contained therein and forward the same by mail,
Securities facsimile or hand delivery, together with any other required
documents, to the Exchange Agent, either with the Preferred
Securities to be tendered or in compliance with the
specified procedures for guaranteed delivery of Preferred
Securities. Certain brokers, dealers, commercial banks,
trust companies and other nominees may also effect tenders
by an Agent's Message (defined herein) in case of book-entry
delivery to the Exchange Agent prior to the Expiration Date.
Holders of Preferred Securities registered in the name of a
broker, dealer, commercial bank, trust company or other
nominee are urged to contact such person promptly if they
wish to tender Preferred Securities pursuant to the Exchange
Offer. See "The Exchange Offer -- Procedures for Tendering
Preferred Securities."
13
<PAGE>
Letters of Transmittal and certificates representing
Preferred Securities should not be sent to the Company or
the Trust. Such documents should only be sent to the
Exchange Agent.
Resales of Exchange The Company and the Trust are making the Exchange Offer in
Preferred reliance on the position of the Staff as set forth in
Securities certain interpretive letters addressed to third parties in
other transactions. However, neither the Company nor the
Trust has sought its own interpretive letter and there can
be no assurance that the Staff would make a similar
determination with respect to the Exchange Offer as it has
in such interpretive letters to third parties. Based on
these interpretations by the Staff, and subject to the two
immediately following sentences, the Company and the Trust
believe that Exchange Preferred Securities issued pursuant
to this Exchange Offer in exchange for Preferred Securities
may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Preferred
Securities are acquired in the ordinary course of such
holder's business and that such holder is not participating,
and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Preferred Securities.
However, any holders of Preferred Securities who is an
"affiliate" of the Company or the Trust or who intends to
participate in the Exchange Offer for the purpose of
distributing the Exchange Preferred Securities, or any
broker-dealer who purchased the Preferred Securities from
the Trust to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (a) will not
be able to rely on the interpretations of the Staff set
forth in the above-mentioned interpretive letters, (b) will
not be permitted or entitled to tender such Preferred
Securities in the Exchange Offer and (c) must comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer
of such Preferred Securities unless such sale is made
pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds
Preferred Securities acquired for its own account as a
result of market-making or other trading activities and
exchanges such Preferred Securities for Exchange Preferred
Securities, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Preferred
Securities.
Each holder of Preferred Securities who wishes to exchange
Preferred Securities for Exchange Preferred Securities in
the Exchange Offer will be required to represent that (i) it
is not an "affiliate" of the Company or the Trust, (ii) any
Exchange Preferred Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it
has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the
Securities Act) of such Exchange Preferred Securities and
(iv) if such holder is not a broker-dealer, such holder is
not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of
such Exchange Preferred Securities. Each broker-dealer that
receives Exchange Preferred Securities for its own account
pursuant to the Exchange Offer must acknowledge that it
acquired the Exchange Preferred Securities for its own
account as the result of market-making activities or other
trading activities and it will deliver a prospectus meeting
the requirements of the
14
<PAGE>
Securities Act in connection with any resale of such
Exchange Preferred Securities. The Letter of Transmittal
states that, by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities
Act. Based on the position taken by the Staff in the
interpretive letters referred to above, the Company and the
Trust believe that Participating Broker-Dealers who acquired
Preferred Securities for their own accounts as a result of
market-making activities or other trading activities may
fulfill their prospectus delivery requirements with respect
to the Exchange Preferred Securities received upon exchange
of such Preferred Securities (other than Preferred
Securities which represent an unsold allotment from the
original sale of the Preferred Securities) with a prospectus
meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with
respect to the resale of such Exchange Preferred Securities.
Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of
Exchange Preferred Securities received in exchange for
Preferred Securities where such Preferred Securities were
acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the
Registration Rights Agreement and to the limitations
described below under "The Exchange Offer -- Resales of
Exchange Preferred Securities," the Company and the Trust
have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of
such Exchange Preferred Securities for a period ending
90-days after the Expiration Date (subject to extension
under certain limited circumstances) or, if earlier, when
all such Exchange Preferred Securities have been disposed of
by such Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who is an
"affiliate" of the Company or the Trust may not rely on such
interpretive letters and must comply with the registration
and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. See "The Exchange
Offer -- Resales of Exchange Preferred Securities."
Exchange Agent The exchange agent with respect to the Exchange Offer is
Wilmington Trust Company (the "Exchange Agent"). The
addresses, and telephone and facsimile numbers, of the
Exchange Agent are set forth in "The Exchange Offer-
Exchange Agent" and in the Letter of Transmittal.
Use of Proceeds Neither the Company nor the Trust will receive any cash pro-
ceeds from the issuance of the Exchange Preferred Securities
offered hereby. See "Use of Proceeds."
Certain United Holders of Preferred Securities should review the
States Federal information set forth under "Certain United States Federal
Income Tax Income Tax Considerations" and "ERISA Considerations"
Considerations; prior to tendering Preferred Securities in the Exchange
ERISA Offer
Considerations"
15
<PAGE>
The Exchange Preferred Securities
Securities Offered Up to $135,000,000 aggregate Liquidation Amount of the
Trust's Exchange Preferred Securities which have been
registered under the Securities Act (Liquidation Amount
$1,000 per Exchange Preferred Security). The Exchange
Preferred Securities will be issued and the Preferred
Securities were issued under the Declaration. The Exchange
Preferred Securities and any Preferred Securities which
remain outstanding after consummation of the Exchange Offer
will vote together as a single class for purposes of
determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Declaration.
See "Description of Exchange Preferred Securities-- Voting
Rights; Modification of the Declaration." The terms of the
Exchange Preferred Securities are identical in all material
respects to the terms of the Preferred Securities, except
that the Exchange Preferred Securities have been registered
under the Securities Act and will not be subject to the
$100,000 minimum Liquidation Amount transfer restriction and
certain other restrictions on transfer applicable to the
Preferred Securities and will not provide for any increase
in the Distribution rate thereon. See "The Exchange Offer--
Purpose of the Exchange Offer," "Description of Exchange
Securities" and "Description of Old Securities."
Distribution Dates February 15 and August 15 of each year, commencing February
15, 1998.
Extension Periods Distributions on the Exchange Preferred Securities will be
deferred for the duration of any Extension Period elected by
the Company with respect to the payment of interest on the
Exchange Notes. No Extension Period will exceed ten
consecutive semi-annual periods or extend beyond the Stated
Maturity Date. See "Description of Exchange Notes-- Option
to Extend Interest Payment Date" and "Certain United States
Federal Income Tax Considerations-- Interest Income and
Original Issue Discount."
Ranking The Exchange Preferred Securities will rank pari passu, and
payments thereon will be made pro rata, with the Preferred
Securities and the Common Securities except as described
under "Description of Exchange Preferred Securities--
Subordination of Common Securities." The Exchange Notes will
rank pari passu with the Old Senior Subordinated Notes and
all other junior subordinated debentures to be issued by the
Company (collectively, with the Old Senior Subordinated
Notes, the "Other Notes") and sold (if at all) to other
trusts to be established by the Company (if any), in each
case similar to the Trust (the "Other Trusts"), and will be
unsecured and subordinate and junior in right of payment to
all Senior Indebtedness to the extent and in the manner set
forth in the Indenture. At June 30, 1997, the aggregate
principal amount of outstanding Senior Indebtedness was
approximately $44.8 million. See "Description of Exchange
Preferred Securities" and "Description of Exchange Notes."
The Exchange Guarantee will rank pari passu with the Company
Guarantee and will constitute an unsecured obligation of the
Company and will rank subordinate and junior in right of
payment to all Senior Indebtedness to the extent and in the
manner set forth in the Exchange Guarantee. See "Description
of Exchange Preferred Securities" and "Description of
Exchange Guarantee."
16
<PAGE>
Optional The Company is permitted to redeem the Senior Subordinated
Redemption Notes at the redemption prices set forth herein in whole or
in part, from time to time, after August 15, 2007. Upon any
such redemption, the proceeds from such redemption shall
simultaneously be applied by the Trust to redeem Securities
and Common Securities at the Redemption Price (as defined
herein). In the event that fewer than all the outstanding
Senior Subordinated Notes are to be so redeemed, then the
proceeds from such redemption shall be allocated to the
redemption pro rata of the Securities and the Common
Securities. See "Description of the Exchange Preferred
Securities-- Optional Redemption."
Mandatory The Preferred Securities will be subject to mandatory
Redemption redemption upon the repayment of the Senior Subordinated
Notes at their stated maturity, upon acceleration, earlier
redemption or otherwise. See "Description of the Exchange
Preferred Securities -- Mandatory Redemption."
Change of Control Upon the occurrence of a Change of Control Triggering Event
Redemption (as defined herein), a Holder of Trust Securities has the
right to require the Trust to exchange all or any part of
the Holder's Trust Securities for Senior Subordinated Notes
having an aggregate principal amount equal to the aggregate
Liquidation Amount of the Trust Securities so offered. Upon
the occurrence of such an event, the Company will be
required to immediately redeem any Senior Subordinated Notes
so exchanged at a redemption price equal to 101% of the
principal amount thereof plus any accrued and unpaid
interest. See "Description of the Exchange Preferred
Securities-- Change of Control Redemption" and "Description
of the Exchange Notes-- Change of Control."
Tax Event or Upon the occurrence of a Tax Event or an Investment Company
Investment Event (each as defined herein), except in certain limited
Company Event circumstances, the Company will cause the Trustees (as
Redemption or defined herein) to dissolve and liquidate the Trust and,
Distribution after satisfaction of liabilities to creditors of the
Trust, cause Senior Subordinated Notes to be distributed to
the holders of the Securities. Upon the occurrence of a Tax
Event, in certain circumstances, the Company will have the
right to redeem the Senior Subordinated Notes in whole (but
not in part) at 100% of the principal amount plus accrued
and unpaid interest, in lieu of a distribution of the Senior
Subordinated Notes, in which event all the Trust Securities
will be redeemed by the Trust at the Liquidation Amount of
$1,000 per each of the Securities plus accrued and unpaid
Distributions. See "Description of the Exchange Preferred
Securities-- Tax Event or Investment Company Event
Redemption or Distribution."
Rating The Preferred Securities were rated BB+ by Standard & Poor's
Ratings Services and Ba3 by Moody's Investors Service, Inc.
17
<PAGE>
Absence of Market The Exchange Preferred Securities will be a new issue of
for the securities for which there currently is no market.
Exchange Preferred Although Donaldson, Lufkin & Jenrette Securities
Securities Corporation, Goldman, Sachs & Co., CIBC Wood Gundy
Securities Corp. and Mesirow Financial, Inc., the initial
purchasers of the Preferred Securities (the "Initial
Purchasers"), have informed the Company and the Trust that
they each currently intend to make a market in the Exchange
Preferred Securities, they are not obligated to do so, and
any such market-making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to
the development or liquidity of any market for the Exchange
Preferred Securities. The Trust and the Company do not
intend to apply for listing of the Exchange Preferred
Securities on any securities exchange or for quotation
through the NASDAQ Stock Market. See "Plan of Distribution."
18
<PAGE>
Summary Company Consolidated Financial Data
The following tables set forth summary consolidated financial information
with respect to the Company for the periods indicated. The historical financial
information was prepared in accordance with Generally Accepted Accounting
Principles.
The financial information for the Company as of June 30, 1997 is unaudited;
however, in management's opinion, it includes all adjustments (consisting of
only normal recurring adjustments) necessary for a fair presentation of results
for such interim periods. Interim results are not necessarily indicative of
results for the full year.
The pro forma consolidated statement of operations data for the year ended
December 31, 1996 and for the six months ended June 30, 1997 present results for
the Company as if the Formation Transaction, the Acquisition and the other
Transactions (as defined herein), the Initial Public Offering and the Buyout
Transaction had occurred as of January 1, 1996. The pro forma consolidated
financial information and the Offering presents pro forma consolidated balance
sheet data of the Company as if the Buyout Transaction described above had
occurred as of June 30, 1997.
19
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31, For The Six Months Ended June 30,
------------------------------------------------- ------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Pro Pro
Forma Forma
1994 1995 1996 1996 (1) 1996 1997 1997 (1)
---- ---- ---- -------- ---- ---- --------
Consolidated Statement of
Operations Data: (2) (3)
Gross Premiums Written $103,134 $124,634 $305,499 $349,492 $146,950 $279,065 $279,065
Net Premiums Written 35,139 53,447 209,592 253,210 77,042 150,524 150,524
Net Premiums Earned 32,126 49,641 191,759 231,146 59,066 136,012 136,012
Net Investment Income 1,241 1,173 6,733 9,185 1,533 5,276 5,276
Other Income 1,632 2,170 9,286 11,503 4,062 10,791 10,791
Net Realized Capital Gain (Loss) (159) (344) (1,015) (986) 228 1,684 1,684
----- ----- ------- ----- --- ----- -----
Total Revenues 34,840 52,640 206,763 250,848 64,889 153,763 153,763
------ ------ ------- ------- ------ ------- -------
Net Earnings (4) $2,117 $4,821 $13,256 $12,162 $4,304 $9,586 $8,089
===== ===== ====== ====== ===== ===== =====
Other Data:
EBITDA (5) $3,259 $9,430 $29,835 $35,721 $7,552 $21,242 $21,242
Adjusted EBITDA (6) $3,418 $9,774 $30,850 $36,707 $7,324 $19,558 $19,558
Ratio of EBITDA to interest
expense and Distributions on
Preferred Securities 2.78x 3.29x
Ratio of Adjusted EBITDA to
interest expense and Distri-
butions on Preferred Securities
(6) 2.86x 3.03x
Total Preferred Securities to
Adjusted EBITDA (6) 3.68x (8)
GAAP Ratios: (2) (7)
Loss and LAE Ratio 82.4% 72.5% 71.5% 70.9% 76.7% 75.9% 75.9%
Expense Ratio 18.1% 16.1% 21.9% 23.9% 20.8% 22.4% 22.9%
----- ----- ----- ----- ----- ----- -----
Combined Ratio 100.5% 88.6% 93.4% 94.8% 97.5% 98.3% 98.8%
====== ===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
At December 31, At June 30, 1997
--------------- -----------------------------------
(dollars in thousands)
<S> <C> <C> <C>
As Adjusted for
1996 Actual the Offering
Consolidated Balance Sheet Data: (2)
Cash and cash equivalents $13,095 $18,329 $18,329
Investments 168,137 190,500 214,728
Total Assets 344,679 567,641 632,081
Losses and Loss Adjustment Expenses 101,719 137,924 137,924
Total Debt 48,000 44,872 ---
Minority Interest:
Preferred Securities --- --- 135,000
Equity in net assets of subsidiary 21,610 26,724 ---
Total Shareholders' Equity 60,900 71,900 73,327
Statutory Capital and Surplus: (9)
Crop (IGF) $29,412 $36,760 $36,760
Nonstandard automobile (Pafco and Superior) $75,233 $82,291 $82,291
</TABLE>
20
<PAGE>
- ---------------
(1) Results of operations of Superior for the years ended December 31, 1994 and
1995 and for the six months ended June 30, 1996 are presented herein in
"Selected Consolidated Historical Financial Data of Superior Insurance Company."
The pro forma consolidated statement of operations data for the year ended
December 31, 1996 and for the six months ended June 30, 1997 present results of
the Company as if the Formation Transaction, the Acquisition and the other
Transactions, the Initial Public Offering and the Buyout Transaction had
occurred as of January 1, 1996. The as adjusted consolidated balance sheet data
as of June 30, 1997 gives effect to the Buyout Transaction and Offering as if
they had occurred as of June 30, 1997. See "Unaudited Pro Forma Consolidated
Financial Statements" for a discussion.
(2) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations of the Company" for a discussion of the accounting treatment
accorded to the crop insurance business.
(3) Consolidated results of operations reflect the results of Superior
subsequent to its acquisition by the Company on April 30, 1996.
(4) Pro forma net earnings for the six month period ended June 30, 1997 and the
year ended December 31, 1996 exclude ($725,000) and ($901,000), respectively,
for the effects of the assumed write-off of debt issuance costs incurred on the
GGS Senior Credit Facility upon repayment of that debt from the proceeds of the
Offering. Such amounts will be presented as extraordinary items in accordance
with Generally Accepted Accounting Principles.
(5) EBITDA consists of earnings before interest, taxes, minority interest,
depreciation and amortization. EBITDA is presented here not as a measure of
operating results, but rather as a measure of the Company's cash flow and debt
service ability, and should not be considered as an alternative to net earnings
and cash flows determined in accordance with GAAP. Because the Company's ability
to obtain dividends from its insurance subsidiaries may be subject to certain
restrictions, EBITDA is not necessarily indicative of the Company's ability to
service its indebtedness.
(6) Adjusted EBITDA is comprised of EBITDA excluding realized gains or losses on
sales of investments.
(7) The Loss and LAE Ratio is calculated by dividing Losses and Loss Adjustment
Expenses by Net Premiums Earned. The Expense Ratio is calculated by dividing
policy acquisition and general and administrative expenses by Net Premiums
Earned. The Combined Ratio is the sum of the Loss and LAE and Expense Ratios. As
a result of the accounting treatment accorded to the MPCI business, the
Company's GAAP Loss and LAE, Expense and Combined Ratios are not comparable to
the ratios for other property and casualty insurers.
(8) This ratio is not meaningful for interim periods.
(9) Statutory capital and surplus is calculated under SAP and is relevant for
insurance regulatory purposes in determining the amount of business an insurance
company may write.
Statutory capital and surplus for Pafco and Superior individually is as follows:
(dollars in thousands)
-------------------------------------------------------------------------------
June 30, As Adjusted,
December 31, 1996 1997 June 30, 1997
----------------------- ---------------------- -------------------
Pafco $18,112 $17,273 $17,273
Superior $57,121 $65,018 $65,018
21
<PAGE>
The Trust
The Trust is a statutory business trust created under the laws of the State
of Delaware pursuant to (i) a declaration of trust executed by the Company, as
sponsor of the Trust, and certain of the trustees of the Trust and (ii) the
filing of a certificate of trust with the Secretary of the State of Delaware on
August 4, 1997. The original declaration of trust of the Trust was amended and
restated in its entirety in the form of the Amended and Restated Declaration of
Trust of the Trust (the "Declaration"). The Company acquired Common Securities
in an aggregate Liquidation Amount equal to not less than 3% of the total
capital of the Trust representing all of the Common Securities of the Trust. The
Common Securities rank pari passu, and payment will be made thereon pro rata,
with the Preferred Securities, except that, upon the occurrence and during the
continuance of a Declaration Event of Default (as defined herein), the rights of
the Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the Preferred Securities. See
"Description of the Exchange Preferred Securities -- Subordination of Common
Securities." The assets of the Trust consist of the Senior Subordinated Notes.
The Trust exists for the exclusive purpose of (i) issuing and selling the Trust
Securities representing undivided beneficial ownership interests in the assets
of the Trust, (ii) investing the proceeds of the Trust Securities in the Senior
Subordinated Notes and (iii) engaging in only those other activities necessary
or incidental thereto. Accordingly, the Senior Subordinated Notes will be the
sole assets of the Trust, and payments under the Senior Subordinated Notes will
be the sole revenue of the Trust.
The Trust has a term of approximately fifty years but may dissolve earlier
as provided in the Declaration. The Trust business and affairs are conducted by
its trustees (the "Trustees"), each appointed by the Company as sole holder of
the Common Securities. Pursuant to the Declaration, the number of Trustees is
five. Three of the Trustees (the "Company Trustees") will be individuals who are
employees or officers of, or who are affiliated with the Company. The fourth
trustee is a financial institution that is unaffiliated with the Company (the
"Preferred Trustee"). The fifth trustee is an entity that maintains its
principal place of business in the State of Delaware (the "Delaware Trustee").
Wilmington Trust Company acts as Preferred Trustee and as Delaware Trustee
until, in each case, removed or replaced by the Holder of the Common Securities.
Wilmington Trust Company also acts as trustee under the Guarantee (the
"Guarantee Trustee") and under the Indenture (the "Indenture Trustee"). See
"Description of the Exchange Guarantee" and "Description of the Exchange
Preferred Securities."
The Preferred Trustee will hold title to the Senior Subordinated Notes for
the benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers and privileges under the Indenture as the holder of
the Senior Subordinated Notes. In addition, the Preferred Trustee maintains
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Senior
Subordinated Notes for the benefit of the holders of Securities. The Company, as
the direct or indirect holder of all the Common Securities, will have the right
to appoint, remove or replace any of the Trustees and to increase or decrease
the number of Trustees, provided that the number of Trustees shall be at least
three, a majority of which shall be Company Trustees. The holder of the Common
Securities of the Trust, or the holders of a majority in Liquidation Amount of
the Securities if a Declaration Event of Default has occurred and is continuing,
will be entitled to appoint, remove or replace the Preferred Trustee and/or the
Delaware Trustee for such Trust. In no event will the holders of the Securities
have the right to vote to appoint, remove or replace the Company Trustees; such
voting rights are vested exclusively in the holder of the Common Securities. The
duties and obligations of each of the Trustees are governed by the Declaration.
In the Indenture, the Company, as borrower, has agreed to pay for all fees and
expenses related to the Trust, including fees and expenses of the Trustees and
any income taxes, duties and other governmental charges, and all costs and
expenses with respect thereto to which the Trust may become subject and all fees
and expenses related to this Offering and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of the Trust. See "Description of the
Exchange Notes."
The rights of the holders of the Securities, including economic rights,
rights to information and voting rights, if any, are as set forth in the
Declaration and the Delaware Business Trust Act, as amended (the "Trust Act").
See "Description of the Preferred Securities." The Declaration, the Indenture
and the Guarantee also incorporate by reference the terms of the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Declaration, the
Indenture and the Company Guarantee will be qualified under the Trust Indenture
Act.
The place of business and the telephone number of the Trust is: 1100 North
Market Street, Rodney Square North, Wilmington, Delaware 19890-0001, (307)
651-8516.
23
<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the
other information contained in this Prospectus, the following factors in
connection with the Exchange Offer and the Exchange Preferred Securities offered
hereby and should particularly consider the following matters. Certain
statements in the Prospectus and documents incorporated herein by reference are
forward-looking and are identified by the use of forward-looking words or
phrases such as "intended," "will be positioned," "expects," is or are
"expected," "anticipates," and "anticipated." These forward-looking statements
are based on the Company's current expectations. To the extent any of the
information contained in this Prospectus constitutes a "forward-looking
statement" as defined in section 27a(i)(1) of the Securities Act, the risk
factors set forth below are cautionary statements identifying important factors
that could cause results to differ materially from those in the forward-looking
statement.
Factors Relating to the Exchange Preferred Securities
Subordination of the Guarantee and Senior Subordinated Notes
The Company's obligations under the Guarantee and the Senior
Subordinated Notes are subordinate and junior in right of payment to all present
and future Senior Indebtedness (as defined herein) of the Company. No payment of
principal (including redemption payments, if any), premium, if any, or interest
on the Senior Subordinated Notes may be made if (i) any Senior Indebtedness of
the Company having an outstanding principal amount at the time of determination
in excess of $10 million (the "Specified Senior Indebtedness"), is not paid when
due or (ii) any other default on Specified Senior Indebtedness occurs and the
maturity of such Specified Senior Indebtedness is accelerated in accordance with
its terms, unless, in either case, the default has been cured or waived and any
such acceleration has been rescinded or such Specified Senior Indebtedness has
been paid in full. Although the ability of the Company and its Subsidiaries to
incur Indebtedness (as defined herein) is restricted under the Senior
Subordinated Notes, the Company and its Subsidiaries will have the ability to
incur substantial additional Indebtedness, which may be senior to the Senior
Subordinated Notes. See "Description of the Exchange Notes -- Certain
Covenants." Because the Company's assets consist of stock of its Subsidiaries,
and because the Company relies on dividends, management fees and billing fees
from its Subsidiaries to meet its obligations for payment of principal and
interest on its outstanding debt obligations and corporate expenses, the Senior
Subordinated Notes are also effectively subordinate to all existing and future
liabilities of the Company's Subsidiaries. See "Risk Factors -- Holding Company
Structure; Dividend and Other Restrictions; Management Fees."
Option to Extend Interest Payment Period; Tax Considerations
So long as no Event of Default (as defined in the Indenture) has
occurred and is continuing, the Company has the right under the Indenture to
defer the payment of interest on the Senior Subordinated Notes at any time or
from time to time for a period not exceeding ten consecutive semi-annual periods
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity of the Senior Subordinated Notes. See
"Description of Exchange Notes -- Option to Extend Interest Payment Date." As a
consequence of any such deferral, semi-annual Distributions on the Securities by
the Trust will be deferred during any such Extension Period. Distributions to
which holders of the Securities are entitled will accumulate additional
Distributions thereon during any Extension Period at the rate of 9 1/2% per
annum, compounded semi-annually from the relevant payment date for such
Distributions, computed on the basis of a 360-day year of twelve thirty-day
months and the actual days elapsed in a partial month in such period. The term
"Distribution" as used herein will include any such additional Distributions.
During any such Extension Period, the Company may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock, (ii)
make any payment or principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Senior Subordinated Notes or
(iii) make any guarantee payments with respect to any guarantee of the Company
of the debt securities of any Subsidiary of the Company if such guarantee ranks
pari passu with or junior in right of payment to the Senior Subordinated Notes
(other than (a) dividends or distributions in share of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the
23
<PAGE>
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's capital
stock, (e) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged and (f) purchases or
issuances of Common Stock in connection with any of the Company's stock option,
stock purchase, stock loan or other benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans, in each case as
now existing or hereafter established or amended). Prior to the termination of
any such Extension Period, the Company may further defer the payment of
interest, provided that no Extension Period may exceed ten consecutive
semi-annual periods or extend beyond the Stated Maturity of the Senior
Subordinated Notes. Upon the termination of any Extension Period and the payment
of all interest then accrued and unpaid (together with interest thereon at the
annual rate of 9 1/2%, compounded semi-annually, to the extent permitted by
applicable law), the Company may elect to begin a new Extension Period subject
to the above conditions. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the Preferred
Trustee and the Indenture Trustee notice of its election to begin an Extension
Period at least five Business Days (as defined herein) prior to the earlier of
(i) date the Distributions on the Securities would have been payable but for the
election to begin such Extension Period or (ii) the date the Trustees are
required to give notice to any securities exchange or to holders of Trust
Securities of the record date or the date such Distributions are payable, but in
any event, not less than five Business Days prior to such record date. The
Trustees will give notice of the Company's election to begin a new Extension
Period to the holders of the Securities. Subject to the foregoing, there is no
limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of the Preferred Securities -- Distributions"
and "Description of the Exchange Notes -- Option to Extend Interest Payment
Date."
Should an Extension Period occur, a holder of Securities will be
required to accrue income (in the form of original issue discount ("OID")) for
United States federal income tax purposes in respect of its pro rata share of
the Senior Subordinated Notes held by the Trust. As a result, a holder of
Securities will be required to include such amount in gross income for United
States federal income tax purposes in advance of the receipt of cash
attributable to such income, and will not receive the cash related to such
income from the Trust if the holder disposes of the Securities prior to the
record date for the payment of Distributions with respect to such Extension
Period. See "Certain United States Federal Income Tax Considerations."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Senior
Subordinated Notes. However, should the Company elect to exercise such right in
the future, the market price of the Securities is likely to be affected. A
holder that disposes of his, her or its Securities during an Extension Period,
therefore, might not receive the same return on his, her or its investment as a
holder that continues to hold its Securities. In addition, as a result of the
existence of the Company's right to defer interest payments, the market price of
the Securities (which represent undivided beneficial ownership interests in the
assets of the Trust) may be more volatile than the market prices of other
securities with respect to which the issuer does not have such right to defer
interest payments.
Exchange of Securities for Senior Subordinated Notes
The holders of all the outstanding Common Securities have the right at
any time to dissolve the Trust and, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, cause the Senior
Subordinated Notes to be distributed to the holders of the Securities in
liquidation of the Trust. See "Description of the Exchange Preferred Securities
- -- Liquidation Distribution Upon Dissolution."
Under current United States federal income tax law interpretations and
assuming, as expected, that the Trust would not be taxable as a corporation, a
distribution of the Senior Subordinated Notes upon a liquidation of the Trust
would not be a taxable event to holders of the Securities. However, if a Tax
Event were to occur that would cause the Trust to be subject to United States
federal income tax with respect to income received or accrued on the Senior
24
<PAGE>
Subordinated Notes, a distribution of the Senior Subordinated Notes by the Trust
could be a taxable event to the Trust and the holders of the Securities. See
"Certain United States Federal Income Tax Considerations."
Trust's Dependence on the Company
The Trust exists for the exclusive purpose of (i) issuing and selling
the Trust Securities representing undivided beneficial ownership interests in
the assets of the Trust, (ii) investing the proceeds of the Trust Securities in
the Senior Subordinated Notes and (iii) engaging in only those other activities
necessary or incidental thereto. Accordingly, the Senior Subordinated Notes will
be the sole assets of the Trust, and payments under the Senior Subordinated
Notes will be the sole revenue of the Trust.
The ability of the Trust to make distributions or other payments on the
Securities is wholly dependent upon the Company making interest and other
payments on the Senior Subordinated Notes as and when required. The Company is
highly leveraged. See " -- Risks Relating to the Business of the Company --
Leverage" and " -- Holding Company Structure; Dividend and Other Restrictions;
Management Fees." The Company's level of debt presents the risk that the Company
might not generate sufficient cash to service the Company's indebtedness,
including the Senior Subordinated Notes. If the Company were not to make
payments on the Senior Subordinated Notes, the Trust would be unable to make
payments on the Securities as and when required. In such an event, holders of
the Securities would not be able to rely on the Guarantee since distributions or
other payments on the Securities are subject to such Guarantee only if and to
the extent that the Company has made a payment to the Trust of interest or
principal on the Senior Subordinated Notes.
The Indenture provides that the Company, as borrower, shall pay for all
debts and obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Trust, including any taxes and all costs and expenses
with respect thereto to which the Trust may become subject, except for United
States withholding taxes. No assurance can be given that the Company will have
sufficient resources to enable it to pay any such debts, obligations, costs and
expenses on behalf of the Trust. See "Description of the Exchange Guarantee."
Rights Under the Exchange Guarantee
The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Securities. The Guarantee guarantees to the holders of the
Securities the payment of (i) any accrued and unpaid distributions that are
required to be paid on the Securities to the extent the Trust has funds legally
available therefor, (ii) the amount payable upon redemption, including all
accrued and unpaid distributions, of the Securities called for redemption by the
Trust, to the extent the Trust has funds legally available therefor and (iii)
upon a voluntary or involuntary dissolution, winding up or termination of the
Trust (other than in connection with the distribution of Senior Subordinated
Notes to the holders of Securities or redemption of all of the Securities), the
lesser of (a) the aggregate of the Liquidation Amount and all accrued and unpaid
distributions on the Securities to the date of payment to the extent the Trust
has funds legally available therefor and (b) the amount of cash assets of the
Trust remaining available for distribution to holders of the Securities upon the
liquidation of the Trust. The holders of a majority in Liquidation Amount of the
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee. In addition, in the event of a payment default on the Securities, any
holder of Securities may institute a legal proceeding directly against the
Company to enforce such holder's rights in respect thereof under the Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee, or any other person or entity. If the Company were to default on its
obligations under the Senior Subordinated Notes, the Trust would lack available
funds for the payment of Distributions or amounts payable on redemption of the
Securities or otherwise, and in such event, the holders of the Securities would
not be able to rely upon the Guarantee for payment of such amounts. Instead,
holders of the Securities could rely on the enforcement (i) by the Preferred
Trustee of its rights as registered holder of the Senior Subordinated Notes,
against the Company pursuant to the terms of the Senior Subordinated Notes or
(ii) by a Special Trustee elected by 25% in Liquidation Amount of the Securities
of the Trust's rights under the Senior Subordinated Notes or (iii) if the
Preferred Trustee or the Special Trustee do not enforce the Trust's rights
against the Company, by
25
<PAGE>
such holder of its right of direct action against the Company on behalf of the
Trust to enforce payments on the Senior Subordinated Notes. See "Description of
the Exchange Guarantee" and "Description of the Exchange Notes -- Subordination"
herein. The Declaration provides that each holder of Securities, by acceptance
thereof, agrees to the provisions of the Guarantee (including the subordination
provisions thereof) and the Indenture.
Change of Control Redemption
Upon the occurrence of a Change of Control Triggering Event (as defined
herein), a holder of Trust Securities has the right to require the Trust to
exchange all or any part of the holder's Trust Securities for Senior
Subordinated Notes having an aggregate principal amount equal to the aggregate
Liquidation Amount of the Trust Securities so offered. Upon the occurrence of
such an event, the Company will be required to immediately redeem any Senior
Subordinated Notes so exchanged at a redemption price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest. See "Description
of the Exchange Preferred Securities" and "Description of the Exchange Notes --
Change of Control."
Tax Event or Investment Company Event Redemption or Distribution
Upon the occurrence of a Tax Event or Investment Company Event, the
Company will, except in certain limited circumstances, cause the Trustees to
dissolve and liquidate the Trust and, after satisfaction of liabilities to
creditors of the Trust, cause Senior Subordinated Notes to be distributed pro
rata to the holders of Trust Securities. Upon the occurrence of a Tax Event, in
certain circumstances, the Company will have the right to redeem the Senior
Subordinated Notes, in whole (but not in part), at 100% of principal amount plus
accrued and unpaid interest, in lieu of a distribution of the Senior
Subordinated Notes, in which event the Securities will be redeemed in whole at
the Liquidation Amount of $1,000 per each of the Securities plus accrued and
unpaid Distributions. In the case of a Tax Event, the Company may also elect to
cause the Securities to remain outstanding. See "Description of the Exchange
Preferred Securities -- Tax Event or Investment Company Event Redemption or
Distribution."
Under current United States federal income tax law and assuming, as
expected, that the Trust is not taxable as a corporation, a distribution of the
Senior Subordinated Notes would not be a taxable event to holders of the
Preferred Securities. However, in the event of a Tax Event which results in the
Trust being treated as an association taxable as a corporation, the distribution
would likely constitute a taxable event to holders of the Securities. See
"Certain United States Federal Income Tax Considerations -- Distribution of
Notes or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Securities or
the Senior Subordinated Notes that may be distributed in exchange for Securities
if a dissolution or liquidation of the Trust were to occur. Accordingly, the
Securities that an investor may purchase, whether pursuant to the offer made
hereby or in the secondary market, or the Senior Subordinated Notes that a
holder of Securities may receive on dissolution and liquidation of the Trust,
may trade at a discount to the price that the investor paid to purchase the
Preferred Securities. Because holders of Securities may receive Senior
Subordinated Notes upon the occurrence of a Tax Event or Investment Company
Event, Holders of Securities are also making an investment decision with regard
to the Exchange Notes and should carefully review all the information regarding
the Exchange Notes contained herein. See "Description of the Exchange Preferred
Securities" and "Description of the Exchange Notes."
Limited Voting Rights
Except in the limited circumstances described herein, holders of
Securities will have no voting rights, including the right to vote to appoint,
remove or replace the Trustees, or increase or decrease their number, the right
to which is vested in the holder(s) of the Common Securities. See "Description
of the Exchange Preferred Securities -- Voting Rights."
26
<PAGE>
Proposed Tax Law Changes
The United States Congress has recently passed and the President has
approved certain changes to United States federal income tax law. While
President Clinton proposed as part of the legislation a denial to an issuer of
an interest deduction, for United States federal income tax purposes, on
instruments such as the Senior Subordinated Notes, the law does not include any
such provision. There can be no assurance, however, that future legislation will
not adversely affect the ability of the Company to deduct interest on the Senior
Subordinated Notes or otherwise affect the tax treatment of the transactions
described herein. Moreover, such legislation could give rise to a Tax Event
which would permit the Company to distribute the Senior Subordinated Notes to
the holders of the Securities or cause a redemption of the Exchange Securities
as described more fully under "Description of the Exchange Notes" and
"Description of the Exchange Preferred Securities." See also "Certain United
States Federal Income Tax Considerations -- Possible Tax Law Changes."
Modification of the Declaration
The Declaration may be modified and amended by the Trustees and the
Company, provided, that if any proposed amendment provides for, or the Trustees
or the Company otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the Trust Securities,
whether by way of amendment to the Declaration or otherwise or (ii) the
dissolution, winding-up or termination of the Trust other than pursuant to the
terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in Liquidation Amount of the Trust Securities
affected thereby; provided that if any amendment or proposal referred to in
clause (i) above would adversely affect only the Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least a majority in Liquidation Amount of such
class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification maybe made
to the Declaration if such amendment or modification would (i) cause the Trust
to be classified for purposes of United States federal income taxation as other
than a grantor trust or another entity which is not subject to United States
federal income tax at the entity level and the assets and income of which are
treated for United States federal income tax purposes as held and derived
directly by holders of interests in the entity, (ii) reduce or otherwise
adversely affect the powers of the Trustees or (iii) cause the Trust to be
deemed an "investment company" which is required to be registered under the 1940
Act.
Consequences of a Failure to Exchange Preferred Securities
The Preferred Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Preferred Securities
which remain outstanding after consummation of the Exchange Offer will continue
to bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Preferred Securities which remain
outstanding will not be entitled to any rights to have such Preferred Securities
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement (subject to certain limited exceptions). The
Company and the Trust do not intend to register under the Securities Act any
Preferred Securities which remain outstanding after consummation of the Exchange
Offer (subject to such limited exceptions, if applicable). To the extent that
Preferred Securities are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Preferred Securities could be adversely affected.
The Exchange Preferred Securities and any Preferred Securities which
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Declaration. See "Description of Exchange
Preferred Securities -- Voting Rights; Modification of the Declaration."
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If a registration statement relating to the Exchange Offer has not been
filed by September 30, 1997 and declared effective by February 9, 1998, the
Distribution rate borne by the Preferred Securities commencing on September 16,
1997 will increase by 0.25% per annum until the Exchange Offer is consummated.
Upon consummation of the Exchange Offer, holders of Preferred Securities will
not be entitled to any increase in the Distribution rate thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Description of Exchange Preferred Securities."
Absence of Public Market
The Preferred Securities were issued to, and the Company believes such
securities are currently owned by, a relatively small number of beneficial
owners. The Preferred Securities have not been registered under the Securities
Act and will be subject to restrictions on transferability if they are not
exchanged for the Exchange Preferred Securities. Although the Exchange Preferred
Securities may be resold or otherwise transferred by the holders (who are not
affiliates of the Company or the Trust) without compliance with the registration
requirements under the Securities Act, they will constitute a new issue of
securities with no established trading market. Preferred Securities may be
transferred by the holders thereof only in blocks having a Liquidation Amount of
not less than $100,000 (100 Preferred Securities). Exchange Preferred Securities
may be transferred by the holders thereof in blocks having a Liquidation Amount
of $1,000 (one Exchange Preferred Security) or integral multiples thereof. The
Company and the Trust have been advised by the Initial Purchasers that the
Initial Purchasers presently intend to make a market in the Exchange Preferred
Securities. However, the Initial Purchasers are not obligated to do so and any
market-making activity with respect to the Exchange Preferred Securities may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the Preferred Exchange Securities or the Preferred Securities or as to the
liquidity of or the trading market for the Exchange Preferred Securities or the
Preferred Securities. If an active public market does not develop, the market
price and liquidity of the Exchange Preferred Securities may be adversely
affected.
If a public trading market develops for the Exchange Preferred
Securities, future trading prices will depend on many factors, including, among
other things, prevailing interest rates, the Company's results and the market
for similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the Exchange Preferred Securities may trade at a discount.
Notwithstanding the registration of the Exchange Preferred Securities
in the Exchange Offer, holders who are "affiliates" (as defined under Rule 405
of the Securities Act) of the Company or the Trust may publicly offer for sale
or resell the Exchange Preferred Securities only in compliance with the
provisions of Rule 144 under the Securities Act.
Each broker-dealer who receives Exchange Preferred Securities for its
own account in exchange for Preferred Securities, where such Preferred
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Preferred Securities.
See "Plan of Distribution."
Exchange Offer Procedures
Issuance of the Exchange Preferred Securities in exchange for Preferred
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Preferred Securities, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of the Preferred Securities desiring to tender such Preferred Securities
in exchange for Exchange Preferred Securities should allow sufficient time to
ensure timely delivery. Neither the Company nor the Trust is under any duty to
give notification of defects or irregularities with respect to the tenders of
Preferred Securities for exchange.
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Risks Relating to the Business of the Company
Leverage
As of June 30, 1997, after giving pro forma effect to the Offering, the
Company would have had aggregate outstanding indebtedness of approximately $135
million. For the fiscal year ended December 31, 1996, on a pro forma basis,
after giving effect to the Offering as if it had occurred on January 1, 1996,
the Company's ratio of earnings to fixed charges would have been 2.47 to 1. See
"Capitalization" and "Unaudited Pro Forma Consolidated Financial Statements."
The Indenture pursuant to which the Senior Subordinated Notes are or
will be issued permits the Company to incur additional indebtedness, subject to
certain limitations. Management believes that cash flow from the operations of
the Insurers will be adequate to permit the Company to make required payments of
principal and interest on its indebtedness, although there can be no assurance
that this will be the case. To the extent that cash flow from operations is
insufficient to satisfy the Company's cash requirements, the Company may seek to
obtain funds from additional borrowings, restructure or refinance additional
equity capital or acquire other businesses that would provide cash flow (in all
such cases to the extent permitted by the Indenture). See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." There can be no assurance that such actions
could be effected on satisfactory terms, in a timely manner or at all, that they
would enable the Company to make any payments due on the Senior Subordinated
Notes or that any such actions would be permitted under the Indenture.
The degree to which the Company is leveraged could have adverse
consequences to holders of the Securities, including the following: (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of principal and interest on its indebtedness, thereby reducing
the funds available to the Company for other purposes, (ii) the Company's
ability to obtain additional financing in the future for working capital,
acquisitions or other purposes may be impaired, (iii) certain of the Company's
borrowings will be at variable rates of interest, which will expose the Company
to the risk of higher interest rates, (iv) the Company's flexibility in planning
for or reacting to changes in market conditions may be limited, (v) the Company
may be substantially more leveraged than certain of its competitors, which may
place the Company at a competitive disadvantage and (vi) the Company may be more
vulnerable in the event of a downturn in its business. The Company's ability to
satisfy its obligations will be dependent upon its future performance, which
will be subject to prevailing economic conditions and to financial, business and
other factors, including factors beyond the control of the Company.
Uncertain Pricing and Profitability
One of the distinguishing features of the property and casualty
industry is that its products generally are priced before its costs are known,
because premium rates usually are determined before losses are reported. Premium
rate levels are related in part to the availability of insurance coverage, which
varies according to the level of surplus in the industry. Increases in surplus
have generally been accompanied by increased price competition among property
and casualty insurers. The nonstandard automobile insurance business in recent
years has experienced very competitive pricing conditions and there can be no
assurance as to the Company's ability to achieve adequate pricing. Changes in
case law, the passage of new statutes or the adoption of new regulations
relating to the interpretation of insurance contracts can retroactively and
dramatically affect the liabilities associated with known risks after an
insurance contract is in place. New products also present special issues in
establishing appropriate premium levels in the absence of sufficient experience
with such products' performance.
The number of competitors and the similarity of products offered, as
well as regulatory constraints, limit the ability of property and casualty
insurers to increase prices in response to declines in profitability or market
demand. In states which require prior approval of rates, it may be more
difficult for the Company to achieve premium rates which are commensurate with
the Company's underwriting experience with respect to risks located in those
states. In addition, the Company does not control rates on its MPCI business,
which are instead set by the FCIC. Accordingly, there can be no assurance that
these rates will be sufficient to produce an underwriting profit.
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The reported profits and losses of a property and casualty insurance
company are also determined, in part, by the establishment of, and adjustments
to, reserves reflecting estimates made by management as to the amount of losses
and loss adjustment expenses ("LAE") that will ultimately be incurred in the
settlement of claims. The ultimate liability of the insurer for all Losses and
LAE reserved at any given time will likely be greater or less than these
estimates, and material differences in the estimates may have a material adverse
effect on the insurer's financial position, results of operations or cash flows
in future periods.
Nature of Nonstandard Automobile Insurance Business
The nonstandard automobile insurance business is affected by many
factors which can cause fluctuations in the results of operations of this
business. Many of these factors are not subject to the control of the Company.
The size of the nonstandard market can be significantly affected by, among other
factors, the underwriting capacity and underwriting criteria of standard
automobile insurance carriers. In addition, an economic downturn in the states
in which the Company writes business could result in fewer new car sales and
less demand for automobile insurance. Severe weather conditions could also
adversely affect the Company's business through higher Losses and LAE. These
factors, together with competitive pricing and other considerations, could
result in fluctuations in the Company's underwriting results and net income.
Nature of Crop Insurance Business
The Company's operating results from its crop insurance program can
vary substantially from period to period as a result of various factors,
including timing and severity of losses from storms, droughts, floods, freezes
and other natural perils and crop production cycles. Therefore, the results for
any quarter or year are not necessarily indicative of results for any future
period. The underwriting results of the crop insurance business are recognized
throughout the year with a reconciliation for the current crop year in the
fourth quarter. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company" for examples of recent events that
could adversely affect the Company's operating results.
The Company expects that for the foreseeable future a majority of its
crop insurance business will continue to be derived from MPCI business. The MPCI
program is federally regulated and supported by the federal government by means
of premium subsidies to farmers, expense reimbursement and federal reinsurance
pools for private insurers. As such, legislative or other changes affecting the
MPCI program could impact the Company's business prospects. The MPCI program has
historically been subject to modification at least annually since its
establishment in 1980, and some of these modifications have been significant. No
assurance can be given that future changes will not significantly affect the
MPCI program and the Company's crop insurance business.
The 1994 Reform Act also reduced the maximum expense reimbursement rate
payable to the Company for its costs of servicing MPCI policies that exceed the
basic CAT Coverage level (such policies, "Buy-up Coverage") for the 1997, 1998
and 1999 crop years to 29.0%, 28.0% and 27.5%, respectively, of the MPCI Premium
serviced, a decrease from the 31% level established for the 1994, 1995 and 1996
crop years. Historically, the FCIC has paid the maximum MPCI Buy-up Expense
Reimbursement Payment rate allowable under law, although no assurance can be
given that this practice will continue. Although the 1994 Reform Act directs the
FCIC to alter program procedures and administrative requirements so that the
administrative and operating costs of private insurance companies participating
in the MPCI program will be reduced in an amount that corresponds to the
reduction in the expense reimbursement rate, there can be no assurance that the
Company's actual costs will not exceed the Buy-up Expense Reimbursement Payment.
The FCIC has appointed several committees comprised of members of the insurance
industry to make recommendations concerning this matter.
The crop insurance industry has recently completed negotiation of the
1998 Standard Reinsurance Agreement ("1998 SRA") with the FCIC, with the 1998
SRA providing for a 27% MPCI Expense Reimbursement and no change to the CAT
Coverage program from prior years.
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<PAGE>
The 1994 Reform Act also directs the FCIC to establish adequate
premiums for all MPCI coverages at such rates as the FCIC determines are
actuarially sufficient to attain a targeted loss ratio. Since 1980, the average
MPCI loss ratio has exceeded this target ratio. There can be no assurance that
the FCIC will not increase rates to farmers in order to achieve the targeted
loss ratio in a manner that could adversely affect participation by farmers in
the MPCI program above the CAT Coverage level.
The 1996 Reform Act limits the role of USDA offices in the delivery of
MPCI coverage for the 1997 Crop Year and eliminated the linkage between CAT
Coverage and qualifications for certain federal farm program benefits.
Currently, MPCI coverage is not required for federal farm program benefits if
producers sign a written waiver that waives eligibility for emergency crop loss
assistance. The 1996 Reform Act also provides that, effective for the 1997 Crop
Year, the Secretary of Agriculture may continue to offer CAT Coverage through
USDA offices if the Secretary of Agriculture determines that the number of
approved insurance providers operating in a state is insufficient to adequately
provide catastrophic risk protection coverage to producers. Effective June 9,
1997, the Secretary of Agriculture announced that the USDA would no longer
provide CAT Coverage through USDA offices in any state. This is to be
implemented by transferring the collection of premium and administration of CAT
policies to the various members of the crop insurance industry. At this time,
the Company has been preliminarily informed that it will receive approximately
17,000 policies that were formerly written by USDA offices, although there can
be no assurance that the Company will receive this number of policies. Based on
historical, per-policy averages, the Company has preliminarily estimated that it
will receive approximately an additional $6 to $7 million in premiums from such
transferred policies, however, there can be no assurance that this number will
be realized. This estimate assumes that IGF will retain 100% of such premiums.
Total MPCI Premium for each farmer depends upon the kind of crops
grown, acreage planted and other factors determined by the FCIC. Each year, the
FCIC sets, by crop, the maximum per unit commodity price ("Price Election") to
be used in computing MPCI Premiums. Any reduction of the Price Election by the
FCIC will reduce the MPCI Premium charged per policy, and accordingly will
adversely impact MPCI Premium volume.
The Company's crop insurance business is also affected by market
conditions in the agricultural industry which vary depending on such factors as
federal legislation and administration policies, foreign country policies
relating to agricultural products and producers, demand for agricultural
products, weather, natural disasters, technological advances in agricultural
practices, international agricultural markets and general economic conditions
both in the United States and abroad. For example, the number of MPCI Buy-up
Coverage policies written has historically tended to increase after a year in
which a major natural disaster adversely affecting crops occurs, and to decrease
following a year in which favorable weather conditions prevail. For further
information about the Company's MPCI business, see "Business -- Crop Insurance."
Highly Competitive Businesses
Both the nonstandard automobile insurance and crop insurance businesses
are highly competitive. Many of the Company's competitors in both the
nonstandard automobile insurance and crop insurance business segments have
substantially greater financial and other resources than the Company, and there
can be no assurance that the Company will be able to compete effectively against
such competitors in the future.
In its nonstandard automobile business, the Company competes with both
large national writers and smaller regional companies. The Company's competitors
include other companies which, like the Company, serve the independent agency
market, as well as companies which sell insurance directly to customers. Direct
writers may have certain competitive advantages over agency writers, including
increased name recognition, loyalty of the customer base to the insurer rather
than an independent agency and, potentially, reduced acquisition costs. In
addition, certain competitors of the Company have from time to time decreased
their prices in an apparent attempt to gain market share. Also, in certain
states, state assigned risk plans may provide nonstandard automobile insurance
products at a lower price than private insurers. See "Business -- Nonstandard
Automobile Insurance -- Competition."
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In the crop insurance business, the Company competes against other crop
insurance companies. In addition, the crop insurance industry has become
increasingly consolidated. From the 1985 crop year to the 1995 crop year, the
number of insurance companies that have entered into agreements with the FCIC to
sell and service MPCI policies has declined from fifty to seventeen. The Company
believes that to compete successfully in the crop insurance business it will
have to market and service a volume of premiums sufficiently large to enable the
Company to continue to realize operating efficiencies in conducting its
business. No assurance can be given that the Company will be able to compete
successfully if this market consolidates further. See "Business -- Crop
Insurance."
Importance of Ratings
A.M. Best has currently assigned Superior a B+ (Very Good) rating and
Pafco a B- (Adequate) rating. A "B+" and a "B-" rating are A.M. Best's sixth and
eighth highest rating classifications, respectively, out of 15 ratings. A "B+"
rating is awarded to insurers which, in A.M. Best's opinion, "have demonstrated
very good overall performance when compared to the standards established by the
A.M. Best Company" and "have a good ability to meet their obligations to
policyholders over a long period of time." A "B-" rating is awarded to insurers
which, in A.M. Best's opinion, "have demonstrated adequate overall performance
when compared to the standards established by the A.M. Best Company" and "have
an adequate ability to meet their obligations to policyholders, but their
financial strength is vulnerable to unfavorable changes in underwriting or
economic conditions." IGF is currently not assigned a rating by A.M. Best. A.M.
Best bases its ratings on factors that concern policyholders and agents and not
upon factors concerning investor protection. Such ratings are subject to change
and are not recommendations to buy, sell or hold securities. One factor in an
insurer's ability to compete effectively is its A.M. Best rating. The A.M. Best
ratings for the Company's rated Insurers are lower than for many of the
Company's competitors. There can be no assurance that such ratings or future
changes therein will not affect the Company's competitive position. See
"Business -- Ratings."
Geographic Concentration
The Company's nonstandard automobile insurance business is concentrated
in the states of Florida, California, Texas, Indiana, Missouri and Virginia;
consequently the Company will be significantly affected by changes in the
regulatory and business climate in those states. See "Business -- Nonstandard
Automobile Insurance -- Marketing." The Company's crop insurance business is
concentrated in the states of Iowa, Texas, Illinois, Kansas, Montana and
Minnesota. The Company will be significantly affected by weather conditions,
natural perils and other factors affecting the crop insurance business in those
states. See "Business -- Crop Insurance."
Future Growth and Continued Operations Dependent on Access to Capital
Property and casualty insurance is a capital intensive business. The
Company must maintain minimum levels of surplus in the Insurers in order to
continue to write business, meet the other related standards established by
insurance regulatory authorities and insurance rating bureaus and satisfy
financial ratio covenants in loan agreements.
Historically, the Company has achieved premium growth as a result of
both acquisitions and internal growth. It intends to continue to pursue
acquisition and new internal growth opportunities. Among the factors which may
restrict the Company's future growth is the availability of capital. Such
capital will likely have to be obtained through debt or equity financing or
retained earnings. There can be no assurance that the Insurers will have access
to sufficient capital to support future growth and also satisfy the capital
requirements of rating agencies and regulators. In addition, the Company will
require additional capital to finance future acquisitions. See " -- Control by
Goran," " -- Potential Limitations on Ability to Raise Additional Capital," and
" -- Conflicts of Interest" below. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company --
Liquidity and Capital Resources."
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Uncertainty Associated with Estimating Reserves for Unpaid Losses and LAE
The reserves for unpaid Losses and LAE established by the Company are
estimates of amounts needed to pay reported and unreported claims and related
LAE based on facts and circumstances then known. These reserves are based on
estimates of trends in claims severity, judicial theories of liability and other
factors.
Although the nature of the Company's insurance business is primarily
Short-Tail, the establishment of adequate reserves is an inherently uncertain
process, and there can be no assurance that the ultimate liability will not
materially exceed the Company's reserves for Losses and LAE and have a material
adverse effect on the Company's results of operations and financial condition.
Due to the inherent uncertainty of estimating these amounts, it has been
necessary, and may over time continue to be necessary, to revise estimates of
the Company's reserves for Losses and LAE. The historic development of reserves
for Losses and LAE may not necessarily reflect future trends in the development
of these amounts. Accordingly, it may not be appropriate to extrapolate
redundancies or deficiencies based on historical information. See "Business --
Reserves for Losses and Loss Adjustment Expenses."
Reliance upon Reinsurance
In order to reduce risk and to increase its underwriting capacity, the
Company purchases Reinsurance. Reinsurance does not relieve the Company of
liability to its insureds for the risks Ceded to reinsurers. As such, the
Company is subject to credit risk with respect to amounts not recoverable from
reinsurers. Although the Company places its Reinsurance with reinsurers,
including the FCIC, which the Company generally believes to be financially
stable, a significant reinsurer's insolvency or inability to make payments under
the terms of a reinsurance treaty could have a material adverse effect on the
Company's financial condition or results of operations.
The amount and cost of Reinsurance available to companies specializing
in property and casualty insurance are subject, in large part, to prevailing
market conditions beyond the control of such companies. The Company's ability to
provide insurance at competitive premium rates and coverage limits on a
continuing basis depends upon its ability to obtain adequate Reinsurance in
amounts and at rates that will not adversely affect its competitive position.
Due to continuing market uncertainties regarding reinsurance capacity,
no assurances can be given as to the Company's ability to maintain its current
reinsurance facilities, which generally are subject to annual renewal. If the
Company is unable to renew such facilities upon their expiration, the Company
may need to reduce the levels of its underwriting commitments. See "Business --
Nonstandard Automobile Insurance -- Reinsurance" and "Business -- Crop Insurance
- -- Reinsurance Pools and Third-Party Reinsurance in Effect for 1997."
Risks Associated with Investments
The Company's results of operations depend in part on the performance
of its invested assets. As of June 30, 1997, 75.5% of the Company's investment
portfolio was invested in fixed maturity securities, 16.8% in equity securities,
6.2% in short-term investments and 1.5% in real estate and mortgage loans.
Certain risks are inherent in connection with fixed maturity securities
including loss upon default and price volatility in reaction to changes in
interest rates and general market factors. Equity securities involve risks
arising from the financial performance of, or other developments affecting,
particular issuers as well as price volatility arising from general stock market
conditions. See "Business -- Investments."
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Comprehensive State Regulation
The Insurers are subject to comprehensive regulation by government
agencies in the states in which they operate. The nature and extent of that
regulation vary from jurisdiction to jurisdiction, but typically involve prior
approval of the acquisition of control of an insurance company or of any company
controlling an insurance company, regulation of certain transactions entered
into by an insurance company with any of its affiliates, limitations on
dividends, approval or filing of premium rates and policy forms for many lines
of insurance, solvency standards, minimum amounts of capital and surplus which
must be maintained, limitations on types and amounts of investments,
restrictions on the size of risks which may be insured by a single company,
limitation of the right to cancel or non-renew policies in some lines,
regulation of the right to withdraw from markets or agencies, requirements to
participate in residual markets, licensing of insurers and agents, deposits of
securities for the benefit of policyholders, reporting with respect to financial
condition and other matters. In addition, state insurance department examiners
perform periodic financial and market conduct examinations of insurance
companies. Such regulation is generally intended for the protection of
policyholders rather than security holders. No assurance can be given that
future legislative or regulatory changes will not adversely affect the Company.
See "Business -- Regulation."
Holding Company Structure; Dividend and Other Restrictions; Management Fees
Dividends
The Company is a holding company whose principal asset is the capital
stock of the Subsidiaries. The Company relies primarily on dividends and other
payments from its Subsidiaries (including management fees), including the
Insurers, to meet its obligations to creditors and to pay corporate expenses,
including the principal and interest on the Senior Subordinated Notes. The
Insurers are domiciled in the states of Indiana and Florida and each of these
states limits the payment of dividends and other distributions by insurance
companies. Under these laws, the maximum aggregate amounts of dividends
permitted to be paid in 1997 by IGF and Pafco without prior regulatory approval
is $12,122,000 and $561,000, respectively, none of which has been paid. In the
consent order approving the Acquisition (the "Consent Order"), the Florida
Department has prohibited Superior from paying any dividends (whether
extraordinary or not) for four years from the date of Acquisition without the
prior written approval of the Florida Department. Further, state insurance laws
and regulations require that the statutory surplus of an insurance company
following any dividend or distribution by such company be reasonable in relation
to its outstanding liabilities and adequate for its financial needs. See
"Business -- Regulation" and "Management Discussion and Analysis of Financial
Condition and Results of Operations of the Company."
Payment of dividends by IGF requires prior approval by the lender under
the IGF Revolver. There can be no assurance that IGF will be able to obtain this
consent.
Management Fees
The management agreement originally entered into between the Company
and Pafco was assigned as of April 30, 1996 by the Company to GGS Management,
Inc., a wholly owned subsidiary of GGS Holdings ("GGS Management"). This
agreement provides for an annual management fee equal to 15% of Gross Premiums
Written. A similar management agreement with a management fee of 17% of Gross
Premiums Written has been entered into between GGS Management and Superior.
Employees of the Company relating to the nonstandard automobile insurance
business and all Superior employees became employees of GGS Management effective
April 30, 1996. In the consent order approving the Acquisition, the Florida
Department has reserved, for a period of three years, the right to reevaluate
the reasonableness of fees provided for in the Superior management agreement at
the end of each calendar year and to require Superior to make adjustments in the
management fees based on the Florida Department's consideration of the
performance and operating percentages of Superior and other pertinent data.
There can be no assurance that either the Indiana Department or the Florida
Department will not in the future require a reduction in these management fees.
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Control by Goran
The Company is a 67%-owned subsidiary of Goran. Goran has the power to
control the Company, to elect its Board of Directors and to approve any action
requiring shareholder approval, including adopting amendments to the Company's
articles of incorporation and approving or disapproving mergers or sales of all
or substantially all of the assets of the Company. Because Goran has the ability
to elect the Board of Directors of the Company, it will be able to effectively
control all of the Company's policy decisions. As long as Goran is the majority
shareholder of the Company, third parties will not be able to obtain control of
the Company through purchases of Common Stock not owned by Goran.
G. Gordon Symons, Chairman of the Board of Goran, the Company and GGS
Holdings and the father of Alan G. Symons, Chief Executive Officer of the
Company, and Douglas H. Symons, President and Chief Operating Officer of the
Company, and members of the Symons family beneficially own in the aggregate 61%
of the outstanding common stock of Goran. Accordingly, since G. Gordon Symons
and members of his family have the ability to elect the Board of Directors of
Goran, they will have the ability to elect the Board of Directors of the Company
and otherwise to significantly influence the Company's business and operations.
Of the eight directors of the Company, five are current directors of
Goran (three of whom are members of the Symons family and two of whom are
independent directors of Goran) and three are outside directors. Directors and
officers of the Company and Goran may have conflicts of interest with respect to
certain matters affecting the Company, such as potential business opportunities
and business dealings between the Company and Goran and its affiliated companies
and interpretations of agreements.
Potential Limitations on Ability to Raise Additional Capital
Goran's failure to maintain ownership of at least 50% of the Company's
voting securities will expose Goran to a risk that it will be characterized as
an investment company within the meaning of the Investment Company Act of 1940,
as amended (the "1940 Act"), unless Goran's remaining voting securities of the
Company, together with any other investment securities, represent not more than
40% of the total assets of Goran on an unconsolidated basis. In such event,
Goran would be required to comply with the registration and other requirements
of the 1940 Act, which would be significantly burdensome for Goran. This
constraint makes it unlikely that Goran would approve a stock issuance by the
Company that reduces Goran's ownership below 50% and therefor would likely limit
the amount of additional capital which can be raised by the Company through the
issuance of voting securities. Among other consequences, such a limit could
affect the Company's ability to raise funds for acquisition opportunities which
may become available to the Company. In addition, if Goran or the Company ever
sold additional significant amounts of shares of common stock in the public
market, those sales might have an adverse effect on the market price of the
common stock of the Company.
Conflicts of Interest
Currently, Goran does not market property and casualty insurance
products which compete with products sold by the Company. Although there are no
restrictions on the activities in which Goran may engage, management of the
Company does not expect that Goran and the Company will compete with each other
to any significant degree in the sale of property and casualty insurance
products. There can be no assurance, however, that the Company will not
encounter competition from Goran in the future or that actions by Goran or its
affiliates will not inhibit the Company's growth strategy. See "Risk Factors --
Control by Goran."
Conflicts of interest between the Company and Goran could arise with
respect to business dealings between them, including potential acquisitions of
businesses or properties, the issuance of additional securities, the election of
new or additional directors, the payment of dividends by the Company and
interpretations of agreements. The Company has not instituted any formal plan or
arrangement to address potential conflicts of interest that may arise between
the Company and Goran. See "Risk Factors -- Control by Goran."
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Dependence on Key Personnel in Connection with Future Success
The future success of the Company depends significantly upon the
efforts of certain key management personnel including G. Gordon Symons, Chairman
of the Board of the Company, Alan G. Symons, Chief Executive Officer of the
Company, Douglas H. Symons, President and Chief Operating Officer of the Company
and Pafco, Dennis G. Daggett, President of IGF and Roger C. Sullivan, Jr.,
Executive Vice President of Superior. A loss of any of these officers could
adversely affect the Company's business.
Possible Liabilities Relating to Transactions
Prior to the Offering, the Company entered into a number of
transactions, including the Formation Transaction, the Acquisition, the
Transfer, the Distribution, the Dividend and other transactions. The application
of the tax laws to the factual circumstances relating to certain aspects of the
Transactions is uncertain. In particular, while the Company believes that there
is substantial authority for treating Pafco's contribution of IGF to IGF
Holdings in exchange for all of the capital stock of IGF Holdings (the
"Contribution") as a tax-free transaction under Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code"), and therefore that no tax
penalties would in any event be payable, there can be no assurance that the
Internal Revenue Service (the "IRS") would agree with the foregoing tax
treatment. Among other things, the IRS could attempt to recharacterize the
Contribution and the Dividend which could result in a material liability to the
Company. The Company cannot predict with certainty whether or when any such
liabilities might arise.
Accordingly, the Company's results of operations in one or more future
periods could be materially adversely affected by liabilities related to the
Transactions. Goran has agreed to indemnify the Company against any of the
foregoing liabilities; however, in the event that Goran was unable to pay any
such amount, the Company would remain liable.
36
<PAGE>
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds from
the issuance of the Exchange Preferred Securities offered hereby. In
consideration for issuing the Exchange Preferred Securities in exchange for the
Preferred Securities as described in this Prospectus, the Trust will receive
Preferred Securities in like Liquidation Amount. The Preferred Securities
surrendered in exchange for the Exchange Preferred Securities will be retired
and canceled.
All the proceeds to the Trust from the sale of the Preferred Securities
were invested by the Trust in the Old Senior Subordinated Notes. The Company
used the net proceeds received from the sale of the Old Senior Subordinated
Notes primarily to (i) retire bank debt of approximately $44.9 million in
principal amount, (ii) purchase the shares of GGS Holdings not owned by the
Company and (iii) used the remainder for general corporate purposes. The Company
invested the net proceeds in short-term, income-generating, investment-grade
securities.
ACCOUNTING TREATMENTS
The Trust will be treated, for financial reporting purposes, as a
Subsidiary of the Company and, accordingly, the accounts of the Trust will be
included in the consolidated financial statements of the Company. The Securities
will be presented as a separate line item in the consolidated balance sheet of
the Company under the caption "Minority Interest -- Preferred Securities," and
appropriate disclosures about the Securities, the Guarantee and the Senior
Subordinated Notes will be included in the notes to consolidated financial
statements.
All future reports of the Company filed under the Exchange Act will (a)
present the Trust Securities issued by the Trust on the balance sheet as a
separate line item entitled "Minority Interest -- Preferred Securities," (b)
include in a footnote to the financial statements disclosure that the sole
assets of the Trust are the Senior Subordinated Notes (including the outstanding
principal amount, interest rate and maturity date of such Senior Subordinated
Notes) and (c) include in a footnote to the financial statements disclosure that
the Company owns all of the Common Securities of the Trust, the sole assets of
the Trust are the Senior Subordinated Notes, and the back-up obligations, in the
aggregate constitute a full and unconditional guarantee by the Company of the
obligations of the Trust under the Securities.
37
<PAGE>
CAPITALIZATION
Set forth below is the actual capitalization of the Company at June 30,
1997 and the capitalization of the Company at June 30, 1997, as adjusted to give
effect to the Offering and the application of the net proceeds from the Offering
as described in "Use of Proceeds."
Six Months Ended
June 30, 1997
----------------------------------------
As Adjusted for
(in thousands) Actual The Offering (1)
---------------- ------------------
Long-term bank debt $44,872 $ ---
---------------- ------------------
Minority interest:
Preferred Securities --- 135,000
Equity in net assets of subsidiaries 26,724 ---
Shareholders' Equity:
Preferred Stock; 50,000,000 shares
authorized; no shares outstanding --- ---
outstanding
Common Stock, no par value, and
additional paid-in capital;
100,000,000 shares authorized;
10,450,000 shares issued and
outstanding 39,019 39,019
Additional paid-in capital 5,905 5,905
Unrealized loss on investments 2,184 4,218
Retained earnings $24,792 $24,185
---------------- -----------------
Total Shareholders' Equity $71,900 $73,327
---------------- -----------------
Total Capitalization $143,496 $208,327
======== ========
- ---------------
(1) The information as adjusted excludes shares reserved for issuance
pursuant to certain employment agreements with officers of IGF and the
Company's stock option plan.
38
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Balance Sheet of the
Company as of June 30, 1997 and the Statements of Earnings of the Company for
the year ended December 31, 1996 and for the six months ended June 30, 1997
present the financial position and results of operations for the Company as if
the Transactions, including the Formation Transaction, the Acquisition and the
Buyout Transaction, the Initial Public Offering and the Offering had occurred as
of January 1, 1996. The pro forma adjustments are based on available information
and certain assumptions the Company currently believes are reasonable in the
circumstances. The Unaudited Pro Forma Consolidated Balance Sheet and Statements
of Earnings have been derived from and should be read in conjunction with the
historical Consolidated Financial Statements and Notes of the Company for the
year ended December 31, 1996 and the unaudited six months ended June 30, 1997,
contained elsewhere herein, and should be read in conjunction with the
accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet and
Statements of Earnings. The pro forma adjustments and pro forma consolidated
amounts are provided for informational purposes only.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the results of operations or financial
position that would have occurred had the Transaction, including the Formation
Transaction and the Acquisition, and the Buyout Transaction, the Initial Public
Offering and the Offering been consummated on the dates assumed; nor is the pro
forma information intended to be indicative of the Company's future results of
operations.
40
<PAGE>
<TABLE>
Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1997
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Pro Forma
SIG Pro Forma for the
Historical Adjustments Offering
-------------- -------------- --------------
Assets:
Investments $190,500 $24,228 (1) $214,728
Cash and cash equivalents 18,329 --- 18,329
Receivables, net 176,045 --- 176,045
Reinsurance recoverable on paid and unpaid losses, net 70,694 --- 70,694
Prepaid reinsurance premiums 73,927 --- 73,927
Deferred policy acquisition costs 13,121 --- 13,121
Deferred income taxes 2,899 118 (2) 3,017
Property and equipment 9,555 --- 9,555
Investments in and advances to related parties 2,418 --- 2,418
--- 4,900 (3) ---
--- (1,116) (4) ---
--- 2,034 (5) ---
Other 10,153 34,276 (6) 50,247
-------------- -------------- --------------
$567,641 $64,440 $632,081
======== ======= ========
Liabilities:
Losses and Loss Adjustment Expenses $137,924 $--- $137,924
Unearned premiums 160,741 --- 160,741
Reinsurance payable 100,475 --- 100,475
Federal income tax payable 1,594 (391) (7) 1,203
Term debt 44,872 (44,872) (8) ---
Other 23,411 --- 23,411
-------------- ------------- --------------
469,017 (45,263) 423,754
-------------- ------------- --------------
Minority interest:
Preferred securities --- 135,000 (9) 135,000
Equity in net assets of subsidiary 26,724 (26,724) (10) ---
-------------- ------------- --------------
Stockholders' Equity:
Common Stock 39,019 --- 39,019
Additional paid-in capital 5,905 --- 5,905
Unrealized gain/(loss) on investments, net 2,184 2,034 (5) 4,218
--- (725) (11) ---
Retained Earnings 24,792 118 (2) 24,185
-------------- ------------- --------------
71,900 1,427 73,327
-------------- ------------- --------------
$567,641 $64,440 $632,081
======== ======= ========
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
40
<PAGE>
<TABLE>
Unaudited Pro Forma Consolidated Statement of Earnings
Six Months Ended June 30, 1997
(in thousands, except per share data and ratios)
<CAPTION>
<S> <C> <C> <C> <C>
Pro Forma Pro Forma for
SIG Historical Adjustments the Offering
-------------- -------------- --------------
Gross Premiums Written $279,065 $ --- $279,065
======== ========
Net Premiums Written $150,524 --- $150,524
======== ========
Net Premiums Earned $136,012 --- $136,012
Net investment income 5,276 --- 5,276
Other income 10,791 --- 10,791
Net realized capital gains 1,684 --- 1,684
-------------- --------------
Total Revenues 153,763 --- 153,763
-------------- --------------
Losses and loss adjustment expenses 103,293 --- 103,293
Policy acquisition and general and administration expenses --- 82 (12) ---
--- (116) (13) ---
30,397 788 (14) 31,151
Interest Expense 2,744 (2,706) (15) 38
-------------- -------------- --------------
Total Expenses 136,434 (1,952) 134,482
-------------- -------------- --------------
Earnings before income taxes, minority interest
and extraordinary item 17,329 1,952 19,281
Provision for income taxes --- 959 (16) ---
6,183 (118) (17) 7,024
Minority interest:
Distributions on Preferred Securities --- 4,168 (18) 4,168
Equity in earnings of subsidiary 1,560 (1,560) (19) ---
-------------- -------------- --------------
Net earnings from continuing operations (20) $9,586 $(1,497) $8,089
====== ======= ======
Pro Forma for
SIG Historical the Offering
-------------- --------------
Net earnings per common share from continuing
operations - primary (20) $0.90 $0.76
-------------- --------------
Weighted average shares outstanding 10,617 10,617
-------------- --------------
Other Data:
EBITDA (21) --- $21,242
Adjusted EBITDA (22) --- $19,558
Ratio of EBITDA to interest expense and Distributions on Preferred --- 3.29x
Securities
Ratio of Adjusted EBITDA to interest expense and Distributions on
Preferred Securities (22) --- 3.03x
Ratio of earnings to fixed charges (23) --- 2.97x
GAAP Ratios:
Loss Ratio 75.9% 75.9%
Expense Ratio 22.4% 22.9%
-------------- --------------
Combined Ratio 98.3% 98.8%
==== ====
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
41
<PAGE>
<TABLE>
Unaudited Pro Forma Consolidated Statement of Earnings
Year Ended December 31, 1996
(in thousands, except per share data and ratios)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Four Months
Ended April Pro Forma Pro Forma for
30, 1996 Adjustments for the Trans-
SIG Superior the Transactions actions and Pro Forma Pro Forma for
Historical Historical and the IPO the IPO Adjustments the Offering
----------- ----------- ------------- ------------ ----------- -------------
Gross premiums written $305,499 $43,993 $ --- $349,492 $ --- $349,492
======== ======= ======== ========
Net premiums written $209,592 $43,618 $ --- $253,210 $ --- $253,210
=========== =========== ============ =============
Net premiums earned $191,759 $39,387 --- $231,146 --- $231,146
Net investment income 6,733 2,452 --- 9,185 --- 9,185
Other income 9,286 2,217 --- 11,503 --- 11,503
Net realized capital
gains/(losses) (1,015) 29 --- (986) --- (986)
----------- ----------- ------------ -------------
Total Revenues 206,763 44,085 --- 250,848 --- 250,848
----------- ----------- ------------ -------------
Losses and loss
adjustment expenses 137,109 26,715 163,824 163,824
--- --- 77 (24) --- --- ---
--- --- 30 (25) --- 163 (12) ---
Policy acquisition and --- --- (174) (26) --- (231) (13) ---
general and administrative
expenses 42,013 11,445 106 (27) 53,497 1,703 (14) 55,132
--- --- 1,330 (28) --- --- ---
--- --- (719) (29) --- --- ---
Interest expense 3,938 --- (434) (30) 4,115 (4,104) (15) 11
----------- ----------- ------------- ------------ ----------- -------------
Total Expenses 183,060 38,160 216 221,436 (2,469) 218,967
----------- ----------- ------------- ------------ ----------- -------------
Earnings before income
taxes, minority interest
and extraordinary item 23,703 5,925 (216) 29,412 2,469 31,881
Provision for income taxes 8,046 1,952 (75) (16) 9,923 1,460 (16) 11,383
Minority interest:
Distributions on Preferred
Securities --- --- --- --- 8,336 (18) 8,336
Equity in earnings of (19) ---
subsidiary 2,401 --- 1,421 (31) 3,822 (3,822)
----------- ----------- ------------- ------------ ----------- -------------
Net earnings from
continuing
operations (20) $13,256 $3,973 $1,562 $15,667 $(3,505) $12,162
======= ====== ====== ======= ======= =======
Net earnings per
common share
from continuing
operations (20) $1.76 $1.13
===== =====
Weighted average
shares outstanding 7,537 3,193 (32) 10,730
===== ===== ======
Other Data:
EBITDA (21) --- --- 35,721
Adjusted EBITDA (22) --- --- 36,707
Ratio of EBITDA to interest
expense and Distribution on
Preferred Securities --- --- 2.78x
Total Preferred Securities to
EBITDA --- --- 3.78x
Ratio of Adjusted EBITDA to
interest expense and
Distributions on Preferred
Securities (22) --- --- 2.86x
Total Preferred Securities to
Adjusted EBITDA (23) --- --- 3.68x
Ratio of earnings to fixed
charges (31) --- --- 2.47x
GAAP ratios:
Loss Ratio 71.5% 70.9%
Expense Ratio 21.9% 23.9%
----------- -------------
Combined Ratio 93.4% 94.8%
==== ====
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
42
<PAGE>
Notes To Unaudited Pro Forma Consolidated Financial Statements
(1) Application of the net proceeds from the Offering are invested as of June
30, 1997 as follows:
(in thousands)
Offering Proceeds $135,000
Estimated fees and expenses (4,900)
Repayment of GGS Senior Credit Facility (44,872)
Purchase of Minority Interest in GGS Holdings (61,000)
-------------------
General corporate purposes $24,228
-------------------
The pro forma statement of earnings for the six months ended June 30,
1997 and the year ended December 31, 1996 assumes no interest earnings
on funds remaining. However, the Company fully expects to invest such
funds.
(2) Deferred tax assets and retained earnings at June 30, 1997 increase by
$118,000 related to the elimination of the deferred tax liability on
the unremitted earnings of GGS Holdings due to the purchase of the
remaining minority interest share of 48%.
(3) Other assets at June 30, 1997 increase by $4,900,000 representing
deferred Preferred Securities issuance costs to be amortized over their
term (30 years).
(4) Other assets at June 30, 1997 are reduced by $1,116,000 representing
the write-off of unamortized debt issuance costs in connection with the
GGS Senior Credit Facility that was repaid with the proceeds of the
Offering.
(5) Goodwill and equity at June 30, 1997 increase by $2,034,000 for the
after tax effects of the elimination of the minority interest portion
of the unrealized loss on investments held for sale.
(6) Goodwill at June 30, 1997 is increased by $34,276,000 for the excess of
the purchase price of the minority interest share, over the minority
interest liability of $26,724,000 as the entire excess purchase price
is applied to goodwill as all identifiable assets approximate fair
value. Total goodwill at June 30, 1997, including that existing prior
to the Offering aggregates $36,390,000.
(7) Income taxes payable at June 30, 1997 are reduced by $391,000 for the
tax effect of the write-off of the debt issuance costs associated with
the term debt repaid from the proceeds of the Offering.
(8) The GGS Senior Credit Facility is completely repaid with the proceeds
of the Offering.
(9) Issuance of Preferred Securities from the Offering.
(10) Minority interest liability at June 30, 1997 is eliminated with the
purchase of the minority interest share from the proceeds of the
Offering.
(11) Retained earnings at June 30, 1997 is reduced by $725,000 for the after
tax effects of the write-off of the debt issuance costs associated with
the GGS Senior Credit Facility repaid from the proceeds of the
Offering.
(12) Policy acquisition and general and administrative expenses for the six
months ended June 30, 1997 and the year ended December 31, 1996 are
increased by $82,000 and $163,000, respectively, for the amortization
of the Preferred Securities issuance costs. Such costs are amortized
over the life of the Preferred Securities of thirty years.
(13) Policy acquisition and general and administrative expenses for the six
months ended June 30, 1997 and the year ended December 31, 1996 are
decreased by $116,000 and $231,000, respectively, for the amortization
of the debt issuance costs associated with the GGS Senior Credit
Facility. The adjustment for the year ended December 31, 1996 includes
the pro forma adjustment described in Note 21.
(14) Policy acquisition and general and administrative expenses for the six
months ended June 30, 1997 and the year ended December 31, 1996 are
increased by $788,000 and $1,703,000, respectively, for the
amortization of goodwill created by the excess of the purchase price of
the minority interest share in excess of the minority interest
liability. Goodwill is amortized over a 25-year period on a straight
line basis based upon management's estimate of the expected benefit
period.
(15) Interest expense for the six months ended June 30, 1997 and the year
ended December 31, 1996 is decreased by $2,706,000 and $4,104,000,
respectively, for the interest incurred on the GGS Senior Credit
Facility which was repaid from the proceeds of the Offering. The
adjustment for the year ended December 31, 1996 includes the pro forma
adjustment described in Note 25.
43
<PAGE>
Notes To Unaudited Pro Forma Consolidated Financial Statements
(16) All applicable pro forma adjustments to operations are tax affected
at a rate of 35%.
(17) Income tax expense for the six months ended June 30, 1997 is reduced by
$118,000 for the elimination of the deferred tax effects of the
unremitted earnings to SIG of GGS Holdings due to the purchase of the
remaining minority interest.
(18) Distributions on Preferred Securities for the six months ended June 30,
1997 and the year ended December 31, 1996, net of income taxes at 35%,
of $4,168,000 and $8,336,000, respectively, were based on an interest
rate of 9.50%.
(19) Minority interest earnings are eliminated with the purchase of
the remaining minority interest share.
(20) Net earnings and net earnings per common share from continuing
operations for the six month period ended June 30, 1997 and the year
ended December 31, 1996 exclude ($725,000) (($0.07) per share) and
($901,000) (($0.08) per share), respectively, for the effects of the
write-off of debt issuance costs incurred on the GGS Senior Credit
Facility upon repayment of that debt from the proceeds of the Offering.
Such amounts will be presented as extraordinary items in accordance
with GAAP.
(21) EBITDA consists of earnings before interest, taxes, minority interest,
depreciation and amortization. EBITDA is presented here not as a
measure of operating results, but rather as a measure of the Company's
cash flow and debt service ability, and should not be considered as an
alternative to net earnings and cash flows determined in accordance
with GAAP. Because the Company's ability to obtain dividends from its
insurance subsidiaries may be subject to certain restrictions, EBITDA
is not necessarily indicative of the Company's ability to service its
indebtedness.
(22) Adjusted EBITDA is comprised of EBITDA excluding realized gains or
losses on investment sales.
(23) In determining the pro forma ratio of earnings to fixed charges,
earnings are defined as earnings from continuing operations before
income taxes and fixed charges. Fixed charges consist of the total of
interest on all indebtedness and amortization of deferred debt issuance
costs.
(24) Policy, acquisition and general and administrative expenses for the
period prior to the Acquisition are increased by $77,000 for the year
ended December 31, 1996 to reflect amortization of the deferred loan
origination costs of $1,386,000 incurred related to the GGS Senior
Credit Facility. The debt issuance costs are amortized over six years,
the term of the GGS Senior Credit Facility.
(25) Policy, acquisition and general and administrative expenses for the
period prior to the Acquisition are increased by $30,000 for the year
ended December 31, 1996 to reflect amortization of the goodwill of
$2,217,000. Goodwill is amortized over a 25-year period on a
straight-line basis based upon management's estimate of the expected
benefit period.
(26) Policy, acquisition and general and administrative expenses for the
period prior to the Acquisition are decreased by $174,000 for the year
ended December 31, 1996 to reflect the elimination of management fees
charged by Superior's former parent, Fortis, for corporate expenses.
(27) Policy, acquisition and general and administrative expenses for the
period prior to the Formation Transaction are increased by $106,000 for
the year ended December 31, 1996 to reflect amortization of
organization costs of $1,597,000. Organizational costs are amortized
over a five-year period on a straight-line basis.
(28) Interest expense for the period prior to the Acquisition is increased
by $1,330,000 for the year ended December 31, 1996 to reflect the GGS
Senior Credit Facility financing of $48,000,000 related to the
Acquisition. The interest rate utilized was 8.31% based upon the actual
rate in 1996 after consideration of the interest rate swap.
(29) Interest expense for the period prior to the Initial Public Offering is
decreased by $719,000 for the year ended December 31, 1996 to reflect
the retirement of the certain indebtedness of the Company to Goran and
Granite Re aggregating $7,500,000 with a stated interest rate of 10%
which was repaid with the proceeds from the Initial Public Offering.
(30) Interest expense for the year ended December 31, 1996 is decreased by
$434,000 reflecting the interest incurred on a $7,500,000 note payable
to Bank at 9.25% (prime plus 1%) for the period from April 30, 1996 to
the closing of the Initial Public Offering when such debt was repaid.
(31) Minority interest for the period prior to the Formation Transaction has
been increased by $1,421,000 for the year ended December 31, 1996 to
reflect the 48% minority interest of the GS Funds in GGS Holdings.
(32) The weighted average shares outstanding have been adjusted to reflect
the 3,450,000 shares issued in the initial public offering, and have
been further increased by 280,000 shares for the $3.5 million dividend
paid to Goran from the proceeds of the Initial Public Offering, in
accordance with accounting rules which require such presentation for
purposes of pro forma earnings per share calculation.
44
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
OF SYMONS INTERNATIONAL GROUP, INC.
The selected consolidated financial data presented below are derived
from the consolidated financial statements of the Company and its Subsidiaries.
Such financial statements for, and as of the end of, each of the years in the
three-year period ended December 31, 1996, have been audited by Coopers &
Lybrand L.L.P., independent accountants, and are included elsewhere in this
Prospectus. The selected consolidated financial data presented below for, and as
of the end of, each of the six month periods ended June 30, 1996 and 1997 are
derived from the unaudited consolidated financial statements of the Company
included elsewhere in this Prospectus. The results of the operations of the
Company for the six months ended June 30, 1997 are not necessarily indicative of
the results of operations that may be expected for the full year. In the opinion
of management, the unaudited information includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for such periods. The information
set forth below should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto, included elsewhere in this
Prospectus.
The pro forma consolidated statement of operations data for the year
ended December 31, 1996 and for the six months ended June 30, 1997 present
results for the Company as if the Formation Transaction, the Acquisition, the
other Transactions, the Initial Public Offering, the Buyout Transaction and the
Offering had occurred as of January 1, 1996. The pro forma Consolidated Balance
Sheet of the Company gives effect to the Buyout Transaction and the Offering as
if they had occurred as of June 30, 1997.
45
<PAGE>
<TABLE>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------------------------------ -----------------------------------
Historical Historical
----------------------------------------------------------- -----------------------
(in thousands, except per share data)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pro Pro
Forma Forma
1992 1993 1994 1995 1996 1996 (1) 1996 1997 1997 (1)
---- ---- ---- ---- ---- -------- ---- ---- --------
Consolidated
Statement of
Operations Data:
(2) (9)
Gross Premiums
Written $109,219 $88,936 $103,134 $124,634 $305,499 $349,492 $146,950 $279,065 $279,065
Net Premiums
Written 35,425 31,760 35,139 53,447 209,592 253,210 77,042 150,524 150,524
Net Premiums
Earned 35,985 31,428 32,126 49,641 191,759 231,146 59,066 136,012 136,012
Net Investment
Income 1,319 1,489 1,241 1,173 6,733 9,185 1,533 5,276 5,276
Other Income 0 886 1,632 2,170 9,286 11,503 4,062 10,791 10,791
Net Realized
Capital Gains/
(Losses) 486 (119) (159) (344) (1,015) (986) 228 1,684 1,684
--- ----- ----- ----- ------- ----- --- ----- -----
Total Revenues 37,790 33,684 34,840 52,640 206,763 250,848 64,889 153,763 153,763
------ ------ ------ ------ ------- ------- ------ ------- -------
Losses and loss
adjustment
expenses 27,572 25,080 26,470 35,971 137,109 163,824 45,275 103,293 103,293
Policy acquisition
and general and
administrative
expenses 7,955 8,914 5,801 7,981 42,013 55,132 12,283 30,397 31,151
Interest expense 459 996 1,184 1,248 3,938 11 1,261 2,744 38
--- --- ----- ----- ----- ---------- ----- ----- ---------
Total expenses 35,986 34,990 33,455 45,200 183,060 218,967 58,819 136,434 134,482
------ ------ ------ ------ ------- ------- ------ ------- -------
Earnings (loss)
before taxes,
discontinued
operations,
cumulative effect
of an accounting
change and
minority interest 1,804 (1,306) 1,385 7,440 23,703 31,881 6,070 17,329 19,281
Income taxes 996 83 (718) 2,619 8,046 11,383 1,854 6,183 7,024
--- -- ----- ----- ----- ------ ----- ----- -----
Earnings (loss)
before
discontinued
operations,
cumulative effect
of an accounting
change and
minority interest $808 $(1,389) $2,103 $4,821 $15,657 $20,498 $4,216 $11,146 $12,257
=== ======= ===== ===== ====== ====== ===== ====== ======
Net Earnings
(loss) (3) $817 $(323) $2,117 $4,821 $13,256 $12,162 $4,304 $9,586 $8,089
=== ===== ===== ===== ====== ====== ===== ===== =====
</TABLE>
46
<PAGE>
<TABLE>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------------------------------ ----------------------------------
Historical Historical
----------------------------------------------------------- -----------------------
(in thousands, except per share data)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pro Pro
Forma Forma
1992 1993 1994 1995 1996 1996 (1) 1996 1997 1997 (1)
---- ---- ---- ---- ---- -------- ---- ---- --------
Per common
share data:
Earnings (loss)
before
discontinued
operations,
extraordinary
item, cumulative
effect of an
accounting
change and
minority interest $0.12 ($0.20) $0.30 $0.69 $2.08 $1.91 $0.60 $1.05 $1.15
Net Earnings
(loss) $0.12 ($0.05) $0.30 $0.69 $1.76 $1.13 $0.61 $0.90 $0.76
Weighted average
shares outstanding 7,000 7,000 7,000 7,000 7,537 10,730 7,000 10,617 10,617
Other Data:
EBITDA (4) $3,259 $9,430 $29,835 $35,721 $7,552 $21,242 $21,242
Adjusted EBITDA
(5) $3,418 $9,774 $30,850 $36,707 $7,324 $19,558 $19,558
Ratio of earnings
to fixed changes
(6) 4.93x (0.31x) 2.17x 6.96x 6.79x 2.47x 5.67x 7.06x 2.97x
Ratio of EBITDA
to interest expense
and Distributions
on Preferred
Securities 2.78x 3.29x
Ratio of Adjusted
EBITDA to
interest expense
and Distributions
on Preferred
Securities (5) 2.86x 3.03x
Total Preferred
Securities to
EBITDA (5) 3.78x
Total Preferred
Securities to
Adjusted EBITDA
(5) 3.68x
GAAP Ratios:
(2) (7)
Loss and LAE
Ratio 76.6% 79.8% 82.4% 72.5% 71.5% 70.9% 76.7% 75.9% 75.9%
Expense Ratio 22.1% 28.4% 18.1% 16.1% 21.9% 23.9% 20.8% 22.4% 22.9%
----- ----- ----- ----- ----- ----- ----- ----- -----
Combined Ratio 98.7% 108.2% 100.5% 88.6% 93.4% 94.8% 97.5% 98.3% 98.8%
===== ====== ====== ===== ===== ===== ===== ===== =====
</TABLE>
47
<PAGE>
<TABLE>
Six Months Ended
Year Ended December 31, June 30, 1997
--------------------------------------------------------------- ---------------------------
Historical
---------------------------------------------------------------
(in thousands, except per share data)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Pro
1992 1993 1994 1995 1996 Actual Forma
---- ---- ---- ---- ---- ------ -----
Consolidated Balance
Sheet Data: (2) (9)
Investments $27,941 $21,497 $18,572 $25,902 $168,137 $190,500 $214,728
Total assets 75,001 81,540 66,628 110,516 344,679 567,641 632,081
Losses and Loss
Adjustment Expenses 38,616 54,143 29,269 59,421 101,719 137,924 137,924
Total debt 11,528 9,341 10,683 11,776 48,000 44,872 ---
Minority interest:
Preferred Securities --- --- --- --- --- --- 135,000
Equity in net assets of
subsidiary 55 --- 16 --- 21,610 26,724 ---
Total shareholders' equity 1,193 2,219 4,255 9,535 60,900 71,900 73,327
Book value per share $0.17 $0.32 $0.61 $1.36 $5.83 $6.88 $7.02
Statutory Capital and
Surplus: (8)
Crop (IGF) $29,412 $36,760 $36,760
Nonstandard automobile
(Pafco and Superior) $75,233 $82,291 $82,291
- ---------------
</TABLE>
(1) Results of operations of Superior for the years ended December 31, 1994 and
1995 and for the six months ended June 30, 1996 are presented herein in
"Selected Consolidated Historical Financial Data of Superior Insurance Company."
The pro forma consolidated statement of operations data for the year ended
December 31, 1996 and for the six months ended June 30, 1997 present results of
the Company as if the Formation Transaction, the Acquisition and the other
Transactions, the Initial Public Offering and the Buyout Transaction had
occurred as of January 1, 1996. The as adjusted consolidated balance sheet data
as of June 30, 1997 gives effect to the Buyout Transaction and Offering as if
they had occurred as of June 30, 1997. See "Unaudited Pro Forma Consolidated
Financial Statements" for a discussion of pro forma statement adjustments.
(2) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company" for a discussion of the
accounting treatment accorded to the crop insurance business.
48
<PAGE>
(3) Pro forma net earnings (loss) and net earnings per common share for the
six month period ended June 30, 1997 and the year ended December 31,
1996 exclude ($725,000) (($0.07) per share) and ($901,000) (($0.08) per
share), respectively, for the assumed effects of the write-off of debt
issuance costs incurred on the GGS Senior Credit Facility upon
repayment of that debt from the proceeds of the offering. Such amounts
will be presented as extraordinary items in accordance with Generally
Accepted Accounting Principles.
(4) EBITDA consists of earnings before interest, taxes, minority interest,
depreciation and amortization. EBITDA is presented here not as a
measure of operating results, but rather as a measure of the Company's
cash flow and debt service ability, and should not be considered as an
alternative to net earnings and cash flows determined in accordance
with GAAP. Because the Company's ability to obtain dividends from its
insurance subsidiaries may be subject to certain restrictions, EBITDA
is not necessarily indicative of the Company's ability to service its
indebtedness.
(5) Adjusted EBITDA is comprised of EBITDA excluding realized gains or
losses on sales of investments.
(6) In determining the pro forma ratio of earnings to fixed charges,
earnings are defined as earnings from continuing operations before
income taxes and fixed charges. Fixed charges consist of the total of
interest and distributions on all indebtedness and Preferred Securities
and amortization of deferred debt issuance costs.
(7) The Loss and LAE Ratio is calculated by dividing losses and loss
adjustment expenses by Net Premiums Earned. The Expense Ratio is
calculated by dividing policy acquisition and general and
administrative expenses by Net Premiums Earned. The Combined Ratio is
the sum of the Loss and LAE and Expense Ratios. As a result of the
accounting treatment accorded to the MPCI business, the Company's GAAP
Loss and LAE, Expense and Combined Ratios are not comparable to the
ratios for other property and casualty insurers.
(8) Statutory capital and surplus is calculated under SAP and is relevant
for insurance regulatory purposes in determining the amount of business
an insurance company may write.
Statutory capital and surplus for Pafco and Superior individually is as
follows:
(in thousands)
-------------------------------------------------------------
December 31, June 30, As Adjusted,
1996 1997 June 30, 1997
------------------ --------------- -----------------
Pafco $18,112 $17,273 $17,273
Superior $57,121 $65,018 $65,018
(9) The results of operation and financial condition of the Company do not
include any amounts related to Superior prior to the Acquisition.
49
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY
Certain Accounting Policies for Crop Insurance Operations
The majority of the Company's crop insurance business consists of MPCI.
MPCI is a government-sponsored program with accounting treatment which differs
in certain respects from more traditional property and casualty insurance lines.
Farmers may purchase "CAT Coverage" (the minimum available level of MPCI
coverage) upon payment of a fixed administrative fee of $50 per policy (the "CAT
Coverage Fee") instead of a premium. This fee is included in other income.
Commissions paid to agents to write CAT policies are partially offset by the CAT
Coverage Fee. For purposes of the profit-sharing formula under the MPCI program
referred to below, the Company is credited with an imputed premium (its "MPCI
Imputed Premium") for all CAT Coverage policies it sells, determined in
accordance with the profit-sharing formula established by the Federal Crop
Insurance Corporation ("FCIC"). For income statement purposes under GAAP, Gross
Premiums Written consist of the aggregate amount of premiums paid by farmers for
"Buy-up Coverage" (MPCI coverage in excess of CAT Coverage), and any related
federal premium subsidies, but do not include any MPCI Imputed Premium credited
on CAT Coverage. By contrast, Net Premiums Written and Net Premiums Earned do
not include any MPCI Premiums or premium subsidies, all of which are deemed to
be ceded to the United States Government as reinsurer. The Company's profit or
loss from its MPCI business is determined after the crop season ends on the
basis of a complex profit-sharing formula established by federal regulation and
the FCIC. For GAAP income statement purposes, any such profit or loss sharing
earned or payable by the Company is treated as an adjustment to commission
expense and is included in policy acquisition and general and administrative
expenses. Amounts receivable from the FCIC are reflected on the Company's
consolidated balance sheet as reinsurance recoverables.
The Company also receives from the FCIC (i) an expense reimbursement
payment equal to a percentage of Gross Premiums Written for each Buy-up Coverage
policy it writes (the "Buy-up Expense Reimbursement Payment"), (ii) an LAE
reimbursement payment equal to 13.0% of MPCI Imputed Premiums for each CAT
Coverage policy it writes (the "CAT LAE Reimbursement Payment") and (iii) a
small excess LAE Reimbursement Payment of two hundredths of one percent (0.02%)
of MPCI Retention to the extent the Company's MPCI Loss Ratios on a per state
basis exceed certain levels (the "MPCI Excess LAE Reimbursement Payment"). For
GAAP income statement purposes, the Buy-up Expense Reimbursement Payment is
treated as a contribution to income and reflected as an offset against policy
acquisition and general and administrative expenses. The CAT LAE Reimbursement
Payment and the MPCI Excess LAE Reimbursement Payment are, for income statement
purposes, recorded as an offset against LAE, up to the actual amount of LAE
incurred by the Company in respect of such policies, and the remainder of the
payment, if any, is recorded as other income.
In 1996, the Company instituted a policy of recognizing (i) 35% of its
estimated MPCI Gross Premiums Written for each of the first and second quarters,
(ii) commission expense at a rate of 16% of MPCI Gross Premiums Written and
(iii) Buy-up Expense Reimbursement at a rate of 31% of MPCI Gross Premiums
Written along with normal operating expenses incurred in connection with premium
writings. In the third quarter, if a sufficient volume of policyholder acreage
reports have been received and processed by the Company, the Company's policy is
to recognize MPCI Gross Premiums Written for the first nine months based on a
re-estimate. If an insufficient volume of policies have been processed, the
Company's policy is to recognize 20% of its full year estimate of MPCI Gross
Premiums Written in the third quarter. The remaining amount of MPCI Gross
Premiums Written is recognized in the fourth quarter, when all amounts are
reconciled. In prior years, recognition of MPCI Gross Premiums Written was 30%,
30%, 30% and 10%, for the first, second, third and fourth quarters,
respectively. Commencing with its June 30, 1995 financial statements, the
Company also began recognizing MPCI underwriting gain or loss during the first
and second quarters, as well as the third quarter, reflecting the Company's best
estimate of the amount of such gain or loss to be recognized for the full year,
based on, among other things, historical results, plus a provision for adverse
developments. In the fourth quarter, a reconciliation amount is recognized for
the underwriting gain or loss based on final premium and loss information.
51
<PAGE>
Selected Segment Data of the Company
The following table presents historical segment data for the Company's
nonstandard automobile and crop insurance operations. This data does not reflect
results of operations attributable to corporate overhead, or commercial
insurance operations, nor does it include the results of operations of Superior
prior to May 1, 1996.
<TABLE>
Year Ended December 31, Six Months Ended June 30,
------------------------------------------ ---------------------------
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
1994 1995 1996 (1) 1996 1997 (1)
---- ---- ---- ---- ----
Nonstandard Automobile Insurance Operations:
Gross Premiums Written (2 ) $45,593 $49,005 $187,176 $62,290 $165,547
Net Premiums Written (2) 28,114 37,302 186,579 62,089 133,843
Net Premiums Earned (2 ) 25,390 34,460 168,746 52,844 128,244
Net investment income 904 624 6,489 1,435 5,094
Other income 1,545 1,787 7,578 2,333 7,204
Net realized capital gains (losses) (55) (508) (1,014) 212 1,684
---- ----- ------- --- -----
Total revenues 27,784 36,363 181,799 56,824 142,226
------ ------ ------- ------ -------
Losses and Loss Adjustment Expenses 18,303 25,423 124,385 38,831 99,024
Policy acquisition and general and
administrative expenses 8,709 12,929 46,796 15,774 35,492
Interest and amortization of intangibles 0 0 3,184 696 2,711
- - ----- --- -----
Total expenses 27,012 38,352 174,365 55,301 137,227
------ ------ ------- ------ -------
Earnings (loss) before income taxes $772 $(1,989) $7,434 $1,523 $4,999
=== ======= ===== ===== =====
GAAP Ratios (Nonstandard Automobile Only)
Loss and LAE Ratio 72.1% 73.8% 73.7% 73.5% 77.2%
Expense Ratio, net of billing fees 28.2% 32.3% 25.1% 25.4% 22.1%
----- ----- ----- ----- -----
Combined Ratio 100.3% 106.1% 98.8% 98.9% 99.3%
====== ====== ===== ===== =====
Crop Insurance Operations: 1(3)
Gross Premiums Written (4) $54,455 $70,374 $110,059 $80,537 $108,356
Net Premiums Written (4) 4,565 11,608 23,013 14,953 16,680
Net Premiums Earned (4) 4,565 11,608 23,013 6,222 7,768
Net Investment Income 339 674 181 96 92
Other income 73 384 1,672 1,148 3,587
Net realized capital gain (loss) (104) 164 (1) 16 ---
----- --- --- -- ---
Total revenues 4,873 12,830 24,865 7,482 11,447
----- ------ ------ ----- ------
Losses and Loss Adjustment Expenses 7,031 8,629 12,724 6,444 4,269
Policy acquisition and general and
administrative expenses (4,802) (7,466) (6,095) (4,266) (6,026)
Interest expense 492 627 551 120 24
--- --- --- --- --
Total expenses 2,721 1,790 7,180 2,298 (1,733)
----- ----- ----- ----- -------
Earnings (loss) before income taxes $2,152 $11,040 $17,685 $5,184 $13,180
===== ====== ====== ===== ======
Statutory Capital and Surplus:
Pafco (5) $7,848 $11,875 $18,112 $14,872 $17,273
IGF $4,512 $9,219 $29,412 $11,559 $36,760
Superior $43,577 $49,277 $57,121 $48,036 $65,018
</TABLE>
- ---------------
(1) The nonstandard automobile insurance operations include the results of
operations of Superior subsequent to the Acquisition.
(2) Does not reflect Net Premiums Written for Superior for the years ended
December 31, 1994 and 1995 and for the four months ended April 30,
1996. For the years ended December 31, 1994 and 1995, Superior and its
subsidiaries had Gross Premiums Written of $112.9 million and $94.8
million, respectively, and Net Premiums Written of $112.5 million and
$94.1 million, respectively. For the four months ended April 30, 1996,
Superior and its subsidiaries had Gross Premiums Written of $44.0
million and Net Premiums Written of $43.6 million.
(3) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company."
(4) Crop hail insurance premiums are primarily written in the second and
third calendar quarters.
(5) The statutory surplus of Pafco includes Pafco's share of IGF's
statutory surplus prior to April 30, 1996. Pafco owned the following
percentages of IGF at December 31 of each of the following years:
1994, 98.8%; 1995, 100%. At April 30, 1996, Pafco transferred IGF to
SIG. Prior to the Transfer, IGF also paid a dividend to Pafco in the
form of cash of $7,500,000 and a promissory note of $3,500,000.
51
<PAGE>
Six Months Ended June 30, 1997 and 1996
Overview
For the three and six months ended June 30, 1997, the Company recorded
net earnings of $3,677,000 and $9,586,000 or $0.35 and $0.90 per share. This is
approximately a 35.3% and 123% increase from 1996 comparable amounts of
$2,718,000 and $4,304,000 or $0.39 and $0.61 per share. The improved earnings
for the six months ended were attributable to continued premium growth and
improved expense ratios of the nonstandard automobile segment and continued
growth and profit in the crop segment. The improvement for the three months
ended relates to the growth and profitability of the crop segment. The crop
segment demonstrated enhanced profitability due to higher volume as well as
normal crop underwriting expectations.
Gross Premiums Written
Consolidated Gross Premiums Written increased 41.4% in the second
quarter and 89.9% year-to-date due to growth in both the nonstandard auto and
crop segments. Gross Premiums Written for the nonstandard auto segment increased
104% in the second quarter and 166% year-to-date. Such increase was due
primarily to Gross Premiums Written from Superior of $71,921,000 and
$128,846,000 for the three and six months ended June 30, 1997, as compared to
$25,202,000 in 1996 subsequent to its acquisition on April 30, 1996. While a
portion of this increase relates to four additional months of premium in 1997 of
Superior, additional premium growth relates to internal growth due to improved
service, certain product improvements and tougher uninsured motorist laws in
states such as California and Florida. Such increase was primarily due to volume
rather than rate increases, although the Company adjusts rates on an ongoing
basis. Gross Premiums Written for the crop segment decreased 4.2% in the second
quarter and increase 34.5% year-to-date. The year-to-date increase was due to
continued industry privatization and aggressive marketing efforts, while the
decrease in the second quarter is a reflection of timing of processing of
acreage reports. Remaining Gross Written Premiums represent commercial business
which was ceded 100% effective January 1, 1996 to an affiliate, Granite
Reinsurance Company Ltd.
Net Premiums Written
Net Premiums Written increased in the second quarter and year-to-date
for 1997 as compared to 1996 due to the growth in Gross Premiums Written offset
by quota share Reinsurance.
In 1997, the Company ceded $15,876,000 and $31,353,000 of nonstandard
automobile premiums during the second quarter and year-to-date as part of a 20%
quota share treaty instituted January 1, 1997. No such treaty was in effect
during 1996. In 1997, the Company ceded $6,903,000 and $11,805,000 of crop hail
premiums during the second quarter and year-to-date as part of a 40% quota share
treaty instituted January 1, 1997. In 1996, crop hail premiums were ceded at a
rate of 10%. The nonstandard automobile quota share Reinsurance treaty is not
expected to continue in effect subsequent to the Offering of the Preferred
Securities.
Net Premiums Earned
Net Premiums Earned increased for the three and six months ended June
30, 1997 as compared to the corresponding periods of the prior year, reflecting
the strong growth in Gross Written Premiums offset by the effects of the
nonstandard automobile and crop hail quota share treaties.
Net Investment Income
Net investment income increased $1,863,000 and $3,743,000 for the three
and six months ended June 30, 1997 as compared to the corresponding periods of
the prior year. Such increases were due primarily to investment income from
Superior and greater invested assets.
52
<PAGE>
Other Income
Other income increased $2,668,000 and $6,729,000 for the three and six
months ended June 30, 1997 as compared to the corresponding periods of the prior
year. Such increases were due to billing fee income on nonstandard automobile
business at Superior and due to an increase in the in-force policy count. There
was also an increase in the receipt of CAT Coverage Fees and CAT LAE
Reimbursement Payments due to higher premium volume.
Net Realized Capital Gains
Realized gains of $1,684,000 in 1997 were due primarily to a change in
equity managers and a repositioning of the portfolio.
Loss and LAE
The Loss and LAE Ratio for the nonstandard automobile segment was 82.5%
and 77.2% for the three- and six- months ended June 30, 1997 as compared to
77.2% and 73.5% for the corresponding periods in 1996. The Company, as part of
management's actions to reduce costs and combine operations of the nonstandard
automobile division, combined the claims management as well as the reserving
philosophies of Superior Insurance Company with Pafco General Insurance Company,
the two nonstandard automobile insurance companies in the Group. In order to
align the different reserving philosophies of its two subsidiaries, the Company
adopted the more conservative methodology for the combined business which
required an increase of reserves of $5.3 million. This adjustment increased the
second quarter and year-to-date 1997 loss ratio by 8.1% and 4.1%. While the
Company believes those actions were necessary, the establishment and monitoring
of reserve levels are a highly subjective process involving numerous estimates
and assumptions. Therefore, actual results may differ from current estimates.
The Crop Hail Loss Ratio in 1997 is 54.2% compared to 62.0% in 1996.
Policy Acquisition and General and Administrative Expenses
Policy acquisition and general and administrative expenses have
increased as a result of the increased volume of business produced by the
Company combined with a higher percentage of net premiums retained and offset by
increases in reinsurance commission income. Policy acquisition and general and
administrative expenses rose to $17,514,000 and $30,397,000 or 24.0% and 22.4%
of Net Premium Earned for the three and six months ended June 30, 1997 compared
to $8,614,000 and $12,283,000 or 19.0% and 20.8% of Net Premium Earned in the
corresponding periods of 1996. Such increase was due to a higher mix of
nonstandard automobile premiums in 1997 as compared to 1996. The Expense Ratio,
net of billing fees, for the nonstandard automobile segment improved to 21.6%
and 22.1% for the three and six months ended June 30, 1997 as compared to 22.6%
and 25.4% for the corresponding periods in 1996, due to technological and
operational efficiencies, economies of scale and tighter expense controls.
Due to the accounting for the crop insurance segment, operating
expenses for the three and six months ended June 30, 1997 includes a
contribution to earnings of $1,260,000 and $6,026,000, as compared to comparable
amounts of $2,433,000 and $4,266,000 for the corresponding periods in 1996. Such
increase was due to greater Buy-up Expense Reimbursement Payments and MPCI
underwriting gain due to increased premium volumes.
The nonstandard automobile quota share treaty reduced premiums earned,
losses and LAE incurred and policy acquisition and general administrative
expenses by $12,442,000, $8,631,000 and $3,501,000, and $15,812,000,
$10,912,000, and $4,505,000, respectively, for the three and six months ending
June 30, 1997, for a net pre-tax earnings reduction of $310,000 and $395,000 in
the three and six months ending June 30, 1997. Reduction in expenses reflects
ceding commission income net of a deferred acquisition cost adjustment.
Interest Expense
Interest expense increased $232,000 and $1,483,000 for the three and
six months ended June 30, 1997 as compared to the corresponding periods in the
prior year due primarily to interest incurred since April 30, 1996 on the
53
<PAGE>
GGS Senior Credit Facility. The GGS Senior Credit Facility will be repaid with
the proceeds from the Offering of the Preferred Securities.
Income Tax Expense
Income tax expense was 34.8% and 35.7% of pre-tax income for the three
and six months ended June 30, 1997 as compared to 28.3% and 30.5% in 1996. The
increase was due to the Company's selling of its tax exempt investments in the
second half of 1996 as part of its restructuring of the investment portfolios.
Year Ended December 31, 1995 Compared with 1994
Gross Premiums Written
Gross Premiums Written in 1995 increased 20.8%, to $124,634,000 from
$103,134,000 in 1994 reflecting an increase in Gross Premiums Written of 29.2%
in crop insurance and 7.5% in nonstandard automobile insurance. The increase in
Gross Premiums Written for the nonstandard automobile insurance segment was
primarily attributable to an increase in policies in-force of 13.4%. The Company
experienced a greater percentage increase in certain states due to the
introduction of product improvements. In Colorado, Policies In-Force increased
by 46% in 1995. In that state, the Company increased the number of its
deductible options and implemented more favorable pricing for certain personal
injury protection coverages. The crop insurance segment experienced growth in
both the crop hail and MPCI business. The increase in crop hail Gross Premiums
Written to $16,966,000 in 1995 from $10,130,000 in 1994 was due primarily to
increased opportunities to market crop hail coverages to farmers as a result of
the increases in sales of MPCI products (both Buy-up Coverage and CAT Coverage)
due to the 1994 Reform Act. The net increase in MPCI Gross Premiums Written to
$53,408,000 in 1995 from $44,325,000 in 1994 resulted from an increase in the
number of acres insured in 1995 following the 1994 Reform Act.
Net Premiums Written
The Company's Net Premiums Written in 1995 increased 52.1%, to
$53,447,000 from $35,139,000 in 1994 due to an increase in Gross Premiums
Written and a reduction in premiums ceded to reinsurers under quota share
reinsurance for both nonstandard automobile and crop hail insurance. The
percentage of the Company's nonstandard automobile premiums ceded under its
quota share reinsurance treaty was reduced to 25% from an effective percentage
ceded of 38% in 1994 as a result of a reduction in the Company's need for the
additional capacity provided by this reinsurance.
Net Premiums Earned
The Company's Net Premiums Earned in 1995 increased 54.5% reflecting an
increase in Net Premiums Written and a reduction in quota share reinsurance on
the nonstandard automobile insurance business. The ratio of Net Premiums Earned
to Net Premiums Written for nonstandard automobile insurance in 1995 remained
relatively unchanged at 92.4% as compared to 90.3% in 1994.
Net Investment Income
Net investment income in 1995 decreased 5.5% principally due to a
decrease in the average yield earned on invested assets to 5.2% in 1995 from
6.0% in 1994. Although market interest rates increased in 1995, the average
yield on investments declined primarily as a result of the repositioning of the
Company's investment portfolio, begun in the latter part of 1995, into a higher
concentration in fixed income securities, particularly including shorter term
securities. The decrease in the average yield was partially offset by an
increase in average invested assets to $22,653,000 in 1995 from $20,628,000 in
1994.
54
<PAGE>
Other Income
The Company's other income in 1995 increased 34.0% as a result of
increased billing fee income of $351,000 on nonstandard automobile business due
primarily to the increase in the in-force policy count as described above, with
the remainder due primarily to the receipt of CAT Coverage Fees and CAT LAE
Reimbursement Payments following the 1995 introduction of CAT Coverages.
Net Realized Capital Gain (Loss)
The Company recorded a net realized capital loss of $344,000 from the
sale of investments in 1995 as compared to a net realized capital loss of
$159,000 in 1994. The net realized capital loss in 1995 was the result of
appointing a new investment manager in October 1995 and the resulting
repositioning of the Company's investment portfolio described above, as well as
certain write-downs taken on investments with an other than temporary decline in
estimated fair value.
Losses and LAE
The nonstandard automobile segment Loss and LAE Ratio increased to
73.8% in 1995 from 72.1% in 1994 primarily due to increased repair costs for
automobile parts resulting from the implementation of laws prohibiting use of
reconditioned parts as well as general inflationary pressures on costs of
settling claims. The crop hail Loss and LAE Ratio decreased to 74.3% in 1995
from 154.0% in 1994 due to more favorable weather conditions than in the prior
year. Crop insurance Losses and LAE were also impacted by net MPCI Excess LAE
Reimbursement Payment of $0 in 1995 and $936,000 in 1994, after reduction for
LAE reimbursements of $3,324,000 in 1995 compared to $107,000 in 1994. These
reimbursements are reflected in Losses and LAE up to the actual amount of LAE
incurred with any excess reflected in other income.
Policy Acquisition and General and Administrative Expenses
The Company's policy acquisition and general and administrative
expenses in 1995 increased 37.6%, to $7,981,000 from $5,801,000 in 1994. The
nonstandard automobile segment Expense Ratio increased to 37.5% in 1995 from
34.3% in 1994 primarily due to a $2,390,000, or 44%, reduction in ceding
commission income in 1995 arising from reduced reliance on quota share
reinsurance. As a result of the accounting for the crop insurance segment, such
segment experienced a contribution to income reflected in the policy acquisition
and general and administrative expense line item of $7,466,000 in 1995 compared
to a contribution to income of $4,802,000 in 1994. This increase in contribution
resulted from an increase in Buy-Up Expense Reimbursement Payments of $2,521,000
due to higher Gross Premiums Written in 1995, together with an increase in the
MPCI underwriting gain of $6,396,000.
Interest Expense
The Company's interest expense in 1995 increased 5.4% as a result of
increased line of credit borrowings by IGF due to an increase in cash flow
requirements and an increase in applicable interest rates. This was partially
offset by interest savings in 1995 over 1994 resulting from debt principal
repayments and the retirement of a Company term loan in June 1995.
Income Tax Expense
The effective tax rate in 1995 was 35.2% as compared to an effective
tax rate of (52.2%) in 1994. The tax benefit in 1994 was due to a $1,492,000
reduction in the valuation allowance the Company had previously established for
its deferred tax assets.
55
<PAGE>
Liquidity and Capital Resources
The primary source of funds available to the Company as a holding
company are dividends from its primary subsidiaries, IGF, IGF Holdings and GGS
Management. Subsequent to this Offering and the repayment of the GGS Senior
Credit Facility and purchase of the remaining 48% minority interest, GGS
Management will have no dividend restrictions. The Company also receives
$150,000 quarterly pursuant to an administration agreement with IGF to cover the
costs of executive management, accounting, investing, marketing, data processing
and reinsurance.
GGS Management collects billing fees charged to policyholders of Pafco
and Superior who elect to make their premium payments in installments. GGS
Management also receives management fees under its management agreement with
Pafco and Superior. When the Florida Department approved the acquisition of
Superior by GGS Holdings, it prohibited Superior from paying any dividends
(whether extraordinary or not) for four years from the date of Acquisition
without the prior written approval of the Florida Department, and extraordinary
dividends, within the meaning of the Indiana Insurance Code, cannot be paid by
Pafco without the prior approval of the Indiana Commissioner. The management
fees charged to Pafco and Superior by GGS Management are subject to review by
the Indiana and Florida Departments. See "Business -- Regulation."
The nonstandard automobile insurance Subsidiaries' primary source of
funds are premiums, investment income and proceeds from the maturity or sale of
invested assets. Such funds are used principally for the payment of claims,
operating expenses (primarily management fees), commissions, dividends and the
purchase of investments. There is variability to cash outflows because of
uncertainties regarding settlement dates for liabilities for unpaid losses.
Accordingly, the Company maintains investment programs intended to provide
adequate funds to pay claims without forced sales of investments. As claim
payments tend to lag premium receipts and due to the growth in premium volume
the Company has experienced an increase in its investment portfolio and has not
experienced any problems with meeting its obligations for claims payments or
management fees.
The Company is also in the process of preparing a management agreement
between IGF and IGF Holdings similar to that for the nonstandard automobile
operations where IGF will pay IGF Holdings certain management fees for services
rendered by IGF Holdings for IGF. IGF Holdings has no limitations on dividends
to the Company thus providing a cash flow stream other than dividends from IGF
for amounts in excess of IGF Holdings's expenses. As of December 31, 1997, IGF
has the ability to pay $12,122,000 in dividends without prior regulatory
approval.
Cash flows in the Company's MPCI business differ from cash flows from
certain more traditional lines. The Company pays insured losses to farmers as
they are incurred during the growing season, with the full amount of such
payments being reimbursed to the Company by the federal government within three
business days. MPCI premiums are not received from farmers until covered crops
are harvested. Such premiums are required to be paid over in full to the FCIC by
the Company, with interest, if not paid by a specified date in each crop year.
During 1996, IGF continued the practice of borrowing funds under a
revolving line of credit to finance premium payables to the FCIC on amounts not
yet received from farmers (the "IGF Revolver"). The maximum borrowing amount
under the IGF Revolver was $6,000,000 until July 1, 1996, at which time the
maximum borrowing amount increased to $7,000,000. The IGF Revolver carried a
weighted average interest rate of 6.0%, 8.1%, 9.7% and 8.6%, in 1993, 1994, 1995
and 1996, respectively. IGF did not borrow on this line in the first quarter of
1997. These payables to the FCIC accrue interest at a rate of 15%, as do the
receivables from farmers. By utilizing the IGF Revolver, which bears interest at
a floating rate equal to the prime rate plus .25%, IGF avoids incurring interest
expense at the rate of 15% on interest payable to the FCIC while continuing to
earn 15% interest on the receivables due from the farmer. The IGF Revolver
contains certain covenants which restrict IGF's ability to (i) incur
indebtedness, (ii) declare dividends or make any capital distribution upon its
stock whether through redemption or otherwise and (iii) make loans to others,
including affiliates. The IGF Revolver also contains other customary covenants
which, among other things, restricts IGF's ability to participate in mergers,
acquire another enterprise or participate in the organization or creation of any
other business entity. At December 31, 1996, $7,000,000 remains available under
the IGF Revolver.
56
<PAGE>
Net cash provided by operating activities in 1997 aggregated
$26,510,000 compared to $7,982,000 in 1996. This increase in funds provided was
caused by additional cash of $4,690,000 from net earnings adjusted for non-cash
expenses and realized gains or losses, continued premium growth and the normal
receipt of funds from the FCIC in the first quarter on the crop insurance
operations.
Net cash used in investing activities decreased from $82,579,000 in
1996 to $18,870,00 in 1997 reflecting the acquisition of Superior in 1996 offset
in part by the application of funds received from operating activities. The
proceeds from sales of equity securities of $16,531,000 in 1997 reflects a
change in investment managers and a restructuring of the portfolio rather than a
liquidation for operating cash needs.
In 1997, financing activities used cash of $2,406,000 compared to cash
provided of $72,286,000 in 1996. The Company paid principal of $3,128,000 on its
Term Debt as scheduled. The contribution from the GS Funds of $2,304,000
represents a contribution to GGS Holdings that was ultimately contributed to the
insurance subsidiaries for surplus. The Company also contributed cash to
maintain its 52% share. The crop insurance segment had no need to borrow funds
on its revolver in 1997 due to the proceeds it received from the initial public
offering and continued growth and profitable operations.
Net cash provided by operating activities in 1996 was $10,003,000
compared to $9,654,000 in 1995 for an increase of $349,000. This increase was
due to improved profitability and growth in written premiums. Loss payments in
the nonstandard automobile insurance business tend to lag behind receipt of
premiums thus providing cash for operations. Net cash provided by operating
activities in 1995 was $9,654,000 compared to net cash used by operating
activities of $3,302,000 in 1994. Operations in 1995 provided an additional
$12,956,000 in cash compared to 1994 due to additional net earnings of
$2,704,000 and cash flow provided of $5,109,000 relating to premium receipts and
loss payments, including effects of reinsurance, due primarily to growth in
operations with the remainder due to timing of tax and other liability payments.
Net cash used in investing activities increased from $8,835,000 in 1995
to $92,769,000 in 1996. Included in 1996 was a $66,590,000 use of cash for the
Acquisition. The remaining increase in cash used in investing activities in 1996
related to the growth in investments due to increased cash provided by operating
activities. Net cash of $8,835,000 was used in investing activities in 1995
compared to net cash provided by investing activities in 1994 of $1,473,000. The
increase in the use of cash in 1995 over 1994 primarily relates to investing of
excess funds generated by additional operating earnings in fixed income
securities. Due to the nature of insurance operations, the Company does not have
a significant amount of expenditures on property and equipment.
The primary items comprising the $93,550,000 of cash provided by
financing activities in 1996 were the $48,000,000 of proceeds from the GGS
Senior Credit Facility, $21,200,000 minority interest investment received as
part of the formation of GGS Holdings and the funding of the Acquisition and
$37,969,000 of proceeds from the Initial Public Offering.
Cash provided or used by financing activities in 1995 and 1994
primarily related to activity in the Company's line of credit for its crop
segment.
At December 31, 1996 the Company was either in compliance with or
obtained waivers for violations of debt covenants. See "Consolidated Financial
Statements of the Company" for further information.
The Company believes cash flows in the nonstandard automobile segment
from premiums, investment income and billing fees are sufficient to meet that
segment's obligations to policyholders, operating expenses and debt service for
the foreseeable future. This is due primarily to the lag time between receipt of
premiums and claims payments. Therefore, the Company does not anticipate
additional borrowings for this segment other than in the event of an
acquisition. The Company also believes cash flows in the crop segment from
premiums and expense reimbursements are sufficient to meet the segment's
obligations for the foreseeable future. Due to the more seasonal nature of the
crop segment's operations, it may be necessary to obtain short term funding at
times during a calendar year by drawing on
57
<PAGE>
an existing line of credit. Except for this short term funding and normal
increases therein resulting from an increase in the business in force, the
Company does not anticipate any significant short or long term additional
borrowing needs for this segment. Accordingly, while there can be no assurance
as to the sufficiency of the Company's cash flow in future periods, the Company
believes that its cash flow will be sufficient to meet all of the Company's
operating expenses and debt service for the foreseeable future and, therefore,
does not anticipate additional borrowings except as may be necessary to finance
acquisitions.
While GAAP shareholders' equity was $60,900,000 at December 31, 1996,
it does not reflect the statutory equity upon which the Company conducts its
various insurance operations. Pafco, Superior and IGF individually had statutory
surplus at December 31, 1996 of $18,112,000, $57,121,000 and $29,412,000,
respectively.
Effects of Inflation
Due to the short term that claims are outstanding in the two product
lines the Company underwrites, inflation does not pose a significant risk to the
Company.
Primary Differences Between GAAP and SAP
The financial statements contained herein have been prepared in
conformity with Generally Accepted Accounting Principles ("GAAP") which differ
from statutory accounting practices ("SAP") prescribed or permitted for
insurance companies by regulatory authorities in the following respects: (i)
certain assets are excluded as "Nonadmitted Assets" under statutory accounting;
(ii) costs incurred by the Company relating to the acquisition of new business
are expensed for statutory purposes, (iii) the investment in wholly owned
subsidiaries is consolidated for GAAP rather than valued on the statutory equity
method. The net income or loss and changes in unassigned surplus of the
subsidiaries is reflected in net income for the period rather than recorded
directly to unassigned surplus, (iv) fixed maturity investments are reported at
amortized cost or market value based on their National Association of Insurance
Commissioners ("NAIC") rating; (v) the liability for losses and loss adjustment
expenses and unearned premium reserves are recorded net of their reinsured
amounts for statutory accounting purposes, (vi) deferred income taxes are not
recognized on a statutory basis and (vii) credits for reinsurance are recorded
only to the extent considered realizable. Under SAP, credit for reinsurance
ceded is allowed to the extent the reinsurers meet the statutory requirements of
the Insurance Departments of the States of Indiana and Florida, principally
statutory solvency.
New Accounting Standards
The Company has adopted the provisions of SFAS No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," and SFAS No. 123, "Accounting for Stock-Based Compensation." The Company is
to adopt SFAS No. 128, "Earnings Per Share" by December 31, 1997. There was no
material impact on the consolidated financial statements from adoption of these
statements. Refer to Note 1 to the Company's "Consolidated Financial
Statements."
The National Association of Insurance Commissioners ("NAIC") is
considering the adoption of a recommended statutory accounting standard for crop
insurers, the impact of which is uncertain since several methodologies are
currently being examined. Although the Indiana Department has permitted the
Company to continue, for its statutory financial statements through June 30,
1997, its practice of recording its MPCI business as 100% ceded to the FCIC with
net underwriting results recognized in ceding commissions, the Indiana
Department has indicated that in the future it will require the Company to adopt
the MPCI accounting practices recommended by the NAIC or any similar practice
adopted by the Indiana Department. Since such a standard would be adopted
industrywide for crop insurers, the Company would also be required to conform
its future GAAP financial statements to reflect the new MPCI statutory
accounting methodology and to restate all historical GAAP financial statements
consistent with this methodology for comparability. The Company cannot predict
what accounting methodology will eventually be implemented or when the Company
will be required to adopt such methodology. The Company anticipates that any
such new crop accounting methodology will not affect GAAP net income.
58
<PAGE>
The NAIC currently has a project under way to codify SAP, as existing
SAP does not address all accounting issues and may differ from state to state.
Upon completion, the codification is expected to replace prescribed or permitted
SAP in each state as the new comprehensive statutory basis of accounting for
insurance companies. The final format of the codification is uncertain at this
time, yet implementation could be required as early as January 1, 1999. Due to
the project's uncertainty, the Company has not yet quantified the impact any
such changes would have on the statutory capital and surplus or results of
operations of the Company's insurance subsidiaries. The impact of adopting this
new comprehensive statutory basis of accounting may, however, materially impact
statutory capital and surplus.
59
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF
SUPERIOR INSURANCE COMPANY
The following table presents historical data of Superior and its
subsidiaries prior to its acquisition by the Company.
<TABLE>
Six Months Ended
(in thousands) Year Ended December 31, June 30,
------------------------------------------------- ------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
Consolidated Statement of
Operations Data:
Gross Premiums Written $115,660 $112,906 $94,756 $42,915 $69,119
Net Premiums Written 115,294 112,515 94,070 42,515 68,707
Net Premiums Earned 118,136 112,837 97,614 50,053 62,739
Net investment income 8,170 7,024 7,093 4,161 3,476
Other income 5,879 3,344 4,171 1,692 3,092
Net realized capital gains (losses) 3,559 (200) 1,954 711 2,104
----- ----- ----- --- -----
Total revenues 135,744 123,005 110,832 56,617 71,411
Losses and Loss Adjustment
Expenses 85,902 92,378 72,343 38,129 45,963
Policy acquisition and general and
administrative expenses 36,292 38,902 32,705 17,212 17,106
------ ------ ------ ------ ------
Total expenses 122,194 131,280 105,048 55,341 63,067
------- ------- ------- ------ ------
Income (loss) before income taxes,
and a cumulative effect of a change
in accounting principle $13,550 $(8,275) $5,784 $1,276 $8,344
Income taxes 3,981 (3,800) 1,649 161 2,313
----- ------- ----- --- -----
Income (loss) before cumulative
effect of a change in accounting
principle 9,569 (4,475) 4,135 1,115 6,031
Cumulative effective of a change in
accounting principle 1,389 --- --- --- ---
----- --- --- --- ---
Net income (loss) $10,958 $(4,475) $4,135 $1,115 $6,031
GAAP Ratios: (1)
Loss and LAE Ratio 72.7% 81.9% 74.1% 76.2% 73.3%
Expense Ratio 30.7% 34.5% 33.5% 34.4% 27.3%
----- ----- ----- ----- -----
Combined Ratio 103.4% 116.4% 107.6% 110.6% 110.6%
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) The Loss and LAE Ratio is calculated by dividing Losses and Loss
Adjustment Expenses by Net Premiums Earned. The Expense Ratio is
calculated by dividing the sum of policy acquisition and general and
administrative expenses and Interest Expense by Net Premiums Earned.
The Combined Ratio is the sum of the Loss and LAE and Expense Ratios.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF SUPERIOR
On April 30, 1996, Superior was acquired by GGS Holdings. As a result
of the Acquisition, certain financial information relating to Superior's
nonstandard business in respect of periods prior to consummation of the
Acquisition will not be comparable to corresponding financial information for
subsequent periods. The acquisition of Superior was accounted for under the
purchase method of accounting and was recorded as follows (in thousands):
Assets Acquired:
Invested assets $118,665
Receivables 34,933
Deferred acquisition costs 7,925
Other assets 2,082
-----------------
Total 163,605
-----------------
Liabilities Assumed:
Unpaid Losses and LAE 44,423
Unearned premiums 45,280
Other liabilities 10,863
-----------------
Total 100,566
-----------------
Net assets acquired 63,039
Purchase price 66,590
Excess purchase price 3,161
Less amounts allocated to deferred income taxes
on unrealized gains on investments 1,334
-----------------
Goodwill $2,217
=================
Goodwill is amortized over a 25-year period on a straight-line basis
based upon management's estimate of the expected benefit period.
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<PAGE>
The Company's results from operations for the six months ended June 30,
1996 include the results of Superior subsequent to April 30, 1996 as follows (in
thousands):
Gross Premiums $25,202
============
Net Premiums Earned $23,429
Net investment and other income 2,060
------------
Total Revenue 25,489
------------
Losses and LAE 18,804
Policy acquisition and general and
administrative expenses 6,149
------------
Total Expenses 24,953
------------
Income before taxes and minority interest 536
Income taxes 182
------------
Income before minority interest 354
Minority interest 169
------------
Net Income $185
============
Amortization includes goodwill, as previously discussed, and deferred
debt and organizational costs of approximately $1,900,000 which are being
amortized over 5 to 6 years on the straight-line basis. The impact on Net Income
of the aforementioned items was a reduction of $265,000.
Six Months Ended June 30, 1996 and 1995
Gross Premiums Written
Superior's Gross Premiums Written for the six month period ended June
30, 1996 increased $26,204,000 or 61.1% to $69,119,000 from $42,915,000 for the
same period in 1995 due to the modification of the multi-tiered product offered
in Florida and the introduction of a multi-tiered product in the states of
Virginia and California, the introduction of variable commission levels and
improved service to policyholders. The new variable commission structure
attracted sales from independent agents who perceived one of Superior's major
competitors as pursuing a direct marketing approach.
Net Premiums Written
Superior's Net Premiums Written for the six month period ended June 30,
1996 increased $26,192,000 or 61.6%, to $68,707,000 from $42,515,000 for the
same period in 1995 due to an increase in Gross Premiums Written.
Net Premiums Earned
Superior's Net Premiums Earned for the six month period ended June 30,
1996 increased $12,686,000 or 25.3%, to $62,739,000 from $50,053,000 for the
same period in 1995 reflecting an increased in Net Premiums Written. This
increase in Net Premiums Earned does not fully reflect the 61.6% increase in Net
Premiums Written since Net Premiums Earned lagged behind Net Premiums Written.
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<PAGE>
Net Investment Income
Superior's net investment income for the six month period ended June
30, 1996 decreased $685,000, or 16.5%, to $3,476,000 from $4,161,000 for the
same period in 1995 due to the net effects of a decline in the average yield on
invested assets which was partially offset by an increase in average invested
assets.
Other Income
Superior's other income for the six month period ended June 30, 1996
increased $1,400,000, or 82.7%, to $3,092,000 from $1,692,000 for the same
period in 1995 due to a growth in premiums and an increase in billing fees
relating to payment programs associated with an increased number of policies
written.
Net Realized Capital Gain (Loss)
Superior recorded a net realized capital gain from the same of
investments of $2,104,000 for the six month period ended June 30, 1996 compared
to a net realized capital gain from the sale of investment of $711,000 for the
same period in 1995.
Losses and LAE
Superior's Losses and LAE for the six month period ended June 30, 1996
increased $7,834,000, or 20.5%, to $45,963,000 from $38,129,000 for the same
period in 1995 due to an increase in Net Premiums Earned. However, the 20.5%
increase in Losses and LAE was less than the 25.3% increase in Net Premiums
Earned due to improved results in claims administration which resulted in a
change of estimate that resulted in a decrease in reserves of $1,300,000 in the
first quarter of 1996. As a result, the Loss and LAE Ratio for the six month
period ended June 30, 1996 was 73.3% as compared to 76.2% for same period in
1995. The improved results also reflect an improved work flow, productivity, and
a reduction in middle management positions as a result of the claims department
restructuring. Superior has negotiated flat rate fee agreements with all counsel
representing it and has obtained discounts for vendor service for independent
appraisals, total loss evaluations, medical bill review and the sale of salvage.
Policy Acquisition and General and Administrative Expenses
Superior's policy acquisition and general and administrative expenses
for the six month period ended June 30, 1996 decreased $108,000 or 0.6%, to
$17,104,000 from $17,212,000 for the same period in 1995. Policy acquisition and
general and administrative expenses decreased 0.6% although Net Premiums Earned
increased 25.3% due to reduced agents' commissions in Florida and a general
reduction in the cost of overhead. As a result, the Expense Ratio for the six
month period ended June 30, 1996 and was 27.3% as compared to 34.4% for the same
period in 1995.
Income Tax Expense
Superior's income tax expense for the six month period ended June 30,
1996 increased $2,152,000 to $2,313,000 from $161,000 for the same period in
1995. The effective tax rate in 1996 was 27.7% compared to 12.6% in 1995. The
increase in income tax expense and the effective tax rate was due to the
utilization of net operating loss carry-forwards in 1995.
Years Ended December 31, 1995 Compared with 1994
Gross Premiums Written
Superior's Gross Premiums Written in 1995 decreased $18,150,000, or
16.1%, to $94,756,000 from $112,906,000 in 1994 due to the Company's curtailment
of marketing efforts and writings in Illinois, Mississippi,
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<PAGE>
Tennessee, Texas and Washington resulting from more restrictive underwriting
criteria, inadequately priced business in those states and other unfavorable
market conditions.
Net Premiums Written
Superior's Net Premiums Written in 1995 decreased $18,445,000, or
16.4%, to $94,070,000 from $112,515,000 in 1994 due to a decrease in Gross
Premiums Written.
Net Premiums Earned
Superior's Net Premiums Earned in 1995 decreased $15,223,000, or 13.5%,
to $97,614,000 from $112,837,000 in 1994 reflecting a decrease in Net Premiums
Written.
Net Investment Income
Superior's net investment income in 1995 increased $69,000, or 1.0%, to
$7,093,000 from $7,024,000 in 1994 due to a slight increase in the average yield
earned on invested assets resulting from improved market conditions and an
increase in invested assets due to improved operating cash flows.
Other Income
Superior's other income in 1995 increased $827,000, or 24.7%, to
$4,171,000 from $3,344,000 in 1994 due to higher billing fees in Florida
resulting from the ability to collect billing fees during the entire year in
1995 compared to only part of the year in 1994.
Net Realized Capital Gain (Loss)
Superior recorded a net realized capital gain from the sale of
investments of $1,954,000 in 1995 compared to a net realized capital loss from
the sale of investments of $200,000 in 1994. The net realized capital gain in
1995 was the result of disposing of invested assets with increased market
values.
Losses and LAE
Superior's Losses and LAE in 1995 decreased $20,035,000, or 21.7%, to
$72,343,000 from $92,378,000 in 1994 due to a decrease in Net Premiums Earned.
However, the 21.7% decrease in Losses and LAE was greater than the 13.5%
decrease in Net Premiums Earned due to Superior assuming a more aggressive
stance with regard to the evaluation and settlement of bodily injury claims, the
specialization of the handling of physical damage claims with a resulting
reduction in average paid severities and an improvement in productivity and a
reduction in cost as a result of the consolidation of nine claims offices to
three. As a result, the Loss and LAE Ratio for 1995 was 74.1% as compared to
81.9% in 1994.
Policy Acquisition and General and Administrative Expenses
Superior's policy acquisition and general and administrative expenses
in 1995 decreased $6,197,000, or 15.9%, to $32,705,000 from $38,902,000 in 1994
due to reengineering of internal operations aimed at reducing cost and the
introduction of reduced agent commission programs.
Income Tax Expense
Supeerior's income tax expense and effective tax rate for 1995
were $1,649,000 and 28.5%, respectively. This compares to an income tax benefit
of $3,800,000 in 1994, which resulted in an effective tax rate of (45.9)%. The
64
<PAGE>
increase in income tax expense is primarily a function of the improvement in net
income before taxes in 1995 as compared to 1994 and a decreased portion of net
investment income being derived from tax-free sources.
Years Ended December 31, 1994 and 1993
Gross Premiums Written
Superior's Gross Premiums Written in 1994 decreased $2,754,000, or
2.4%, to $112,906,000 from $115,660,000 in 1993 due to the implementation of
certain underwriting restrictions in Texas and the termination of certain agency
relationships in Texas.
Net Premiums Written
Superior's Net Premiums Written in 1994 decreased $2,779,000, or 2.4%,
to $112,515,000 from $115,294,000 in 1993 due to a decrease in Gross Premiums
Written.
Net Premiums Earned
Superior's Net Premiums Earned in 1994 decreased $5,299,000, or 4.5%,
to $112,837,000 from $118,136,000 in 1993 reflecting a decrease in Net Premiums
Written.
Net Investment Income
Superior's net investment income in 1994 decreased $1,146,000, or
14.0%, to $7,024,000 from $8,170,000 in 1993 due primarily to a decline in
average invested assets which resulted from a decrease in operating cash flow
and dividends paid in early 1994.
Other Income
Superior's other income in 1994 decreased $2,535,000, or 43.1%, to
$3,344,000 from $5,879,000 in income in 1993 due to an interruption in the state
of Florida in the charging of billing fees caused by a regulatory change which
increased the minimum down payments.
Net Realized Capital Gain (Loss)
Superior recorded a net realized capital loss from the sale of
investments of $200,000 in 1994 compared to a net realized capital gain from the
sale of investments of $3,559,000 in 1993 due to market conditions which drove
market interest rates higher in 1994 causing Superior's fixed maturity portfolio
to decline in market value.
Losses and LAE
Superior's Losses and LAE in 1994 increased $6,476,000, or 7.5%, to
$92,378,000 from $85,902,000 in 1993 due to claims management inefficiencies
arising from inadequate managerial supervision and a conversion to a new claims
management system. These claims management inefficiencies were substantially
corrected in 1995 as a result of the completion of the implementation of the new
claims management system. The Loss and LAE Ratio for 1994 was 81.9% as compared
to 72.7% for 1993.
Policy Acquisition and General and Administrative Expenses
Superior's policy acquisition and general and administrative expenses
in 1994 increased $2,610,000, or 7.2%, to $38,902,000 from $36,292,000 in 1993
due to a significant increase in employee compensation caused by the hiring of
new officers and managers.
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<PAGE>
Income Tax Expense
Superior recorded an income tax benefit of $3,800,000 and an effective
tax rate of (45.9)% in 1994 as compared to an income tax expense of $3,981,000
and an effective tax rate of 29.4% in 1993. The income tax benefit in 1994 was a
function of the Company's generation of a net loss before income taxes. The low
effective tax rate in 1993 was due to a greater portion of net investment income
being derived from tax-free sources.
66
<PAGE>
BUSINESS
Overview
Symons International Group, Inc., a specialty property and casualty
insurer, underwrites and markets nonstandard private passenger automobile
insurance and crop insurance. Through its Subsidiaries, the Company writes
business in the United States exclusively through independent agencies and seeks
to distinguish itself by offering high quality, technology based services for
its agents and policyholders. The Company had consolidated Gross Premiums
Written of approximately $305 million and $279 million for the twelve months
ended December 31, 1996 and the six months ended June 30, 1997, respectively.
Based on the Company's Gross Premiums Written in 1996, the Company believes that
it is the twelfth largest underwriter of nonstandard automobile insurance in the
United States. Based on premium information compiled in 1996 by the NCIS, the
Company believes that IGF is the fifth largest underwriter of MPCI in the United
States.
The following table sets forth the premiums written by line of business
for the periods indicated:
<TABLE>
Six Months
(in thousands) Years Ended December 31, Ended June 30,
------------------------------------------------- -------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
Nonstandard Automobile: (1)
Gross Premiums Written $45,593 $49,005 $187,176 $62,290 $165,547
Net Premiums Written 28,114 37,302 186,579 62,089 133,843
Crop Hail: (2)
Gross Premiums Written $10,130 $16,966 $27,957 $17,620 $29,339
Net Premiums Written 4,565 11,608 23,013 14,953 16,681
MPCI: (3)
Gross Premiums Written $44,325 $53,408 $82,102 $62,951 $79,017
Net Premiums Written --- --- --- --- ---
Commercial: (4)
Gross Premiums Written $3,086 $5,255 $8,264 $4,089 $5,162
Net Premiums Written 2,460 4,537 --- --- ---
Total: (5)
Gross Premiums Written $103,134 $124,634 $305,499 $146,950 $279,065
======= ======= ======= ======= =======
Net Premiums Written $35,139 $53,447 $209,592 $77,042 $150,524
====== ====== ======= ====== =======
</TABLE>
67
<PAGE>
- ---------------
(1) Does not reflect Net Premiums Written for Superior for the years ended
December 31, 1994 and 1995 and for the four months ended April 30,
1996. For the years ended December 31, 1994 and 1995, Superior and its
subsidiaries had Gross Premiums Written of $112.9 million and $94.8
million, respectively, and Net Premiums Written of $112.5 million and
$94.1 million, respectively. For the four months ended April 30, 1996,
Superior and its subsidiaries had Gross Premiums Written of $44.0
million and Net Premiums Written of $43.6 million.
(2) Most crop hail insurance policies are sold in the second and third
quarters of the calendar year.
(3) For a discussion of the accounting treatment of MPCI Premiums, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company."
(4) All commercial premiums written were written by Pafco and 100% ceded to
Granite Re.
(5) For additional financial segment information concerning the Company's
nonstandard automobile and crop insurance operations, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations of the Company."
Nonstandard Automobile Insurance
Industry Background
The Company, through its Subsidiaries, Pafco and Superior, is engaged
in the writing of insurance coverage on automobile physical damage and liability
policies for "nonstandard risks." The Company believes that the voluntary
nonstandard market has accounted for approximately 15% of total private
passenger automobile insurance premiums written in recent years. According to
statistical information derived from insurer annual statements compiled by A.M.
Best, the nonstandard automobile market accounted for $17.4 billion in annual
premium volume for 1995 up from $9 billion in 1995.
Strategy
The Company has multiple strategies with respect to its nonstandard
automobile insurance operations, including:
o The Company seeks to achieve profitability through a
combination of internal growth and the acquisition of other
insurers and blocks of business. The Company regularly
evaluates acquisition opportunities.
o The Company will seek to expand the multi-tiered marketing
approach currently employed in certain states in order to
offer to its independent agency network a broader range of
products with different premium and commission structures.
o The Company is committed to the use of integrated technologies
which permit it to rate, issue, bill and service policies in
an efficient and cost effective manner.
o The Company competes primarily on the basis of underwriting
criteria and service to agents and insureds and generally does
not match price decreases implemented by competitors which are
directed towards obtaining market share.
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o The Company encourages agencies to place a large share of
their profitable business with its subsidiaries by offering,
in addition to fixed commissions, a contingent commission
based on a combination of volume and profitability.
o The Company responds to claims in a manner designed to reduce
the costs of claims settlements by reducing the number of
pending claims and uses computer databases to verify repair
and vehicle replacement costs and to increase subrogation and
salvage recoveries.
Products
The Company offers both liability and physical damage coverage in the
insurance marketplace, with policies having terms of three to twelve months,
with the majority of policies having a term of six months. Most nonstandard
automobile insurance policyholders choose the basic limits of liability coverage
which, though varying from state to state, generally are $25,000 per person and
$50,000 per accident for bodily injury and in the range of $10,000 to $20,000
for property damage. Of the approximately 228,000 combined policies of Pafco and
Superior in force on December 31, 1996, fewer than 9% had policy limits in
excess of these basic limits of coverage. Of the 63,000 policies of Pafco in
force on December 31, 1996, approximately 88% had policy periods of six months
or less. Of the approximately 165,000 policies of Superior in force as of
December 31, 1996, approximately 74% had policy periods of six months and
approximately 26% had policy periods of twelve months.
The Company offers several different policies which are directed toward
different classes of risk within the nonstandard market. The Superior Choice
policy covers insureds whose prior driving record, insurability and other
relevant characteristics indicate a lower risk profile than other risks in the
nonstandard marketplace. The Superior Standard policy is intended for risks
which do not qualify for Superior Choice but which nevertheless present a more
favorable risk profile than many other nonstandard risks. The Superior Specialty
policies cover risks which do not qualify for either the Superior Choice or the
Superior Standard. Pafco offers only a single nonstandard policy which includes
multiple discounts and surcharges designed to recognize proof of prior
insurance, driving violations, accident history and other factors relevant to
the level of risk insured. Superior offers a product similar to the Pafco
product in states in which it is not offering a multi-tiered product.
Marketing
The Company's nonstandard automobile insurance business is concentrated
in the states of Florida, California, Indiana, Missouri, Texas and Virginia and
the Company writes nonstandard automobile insurance in thirteen additional
states. Management plans to continue to expand selectively into additional
states. The Company will select states for expansion based on a number of
criteria, including the size of the nonstandard automobile insurance market,
state-wide loss results, competition and the regulatory climate. The following
table sets forth the geographic distribution of Gross Premiums Written for the
Company and Superior on a combined basis for the periods indicated. The
following amounts include Gross Premiums Written for Superior prior to its
acquisition by the Company on April 30, 1996.
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Symons International Group, Inc. and Superior Insurance Company (Combined)
Year Ended December 31,
(in thousands)
Six Months
Ended
State 1994 1995 1996 June 30, 1997
- ----- ---- ---- ---- -------------
Arkansas $1,619 $1,796 $2,004 $850
California 13,422 15,350 25,131 31,890
Colorado 5,629 9,257 10,262 4,818
Florida 55,282 54,535 97,659 74,320
Georgia 7,342 5,927 7,398 4,101
Illinois 3,894 2,483 2,994 1,931
Indiana 14,062 13,842 16,599 9,171
Iowa 3,769 3,832 5,818 3,723
Kentucky 9,573 7,840 11,065 5,068
Mississippi 4,411 2,721 2,250 1,410
Missouri 8,163 8,513 13,423 5,214
Nebraska 3,192 3,660 5,390 3,313
Nevada 0 0 0 1,021
Ohio 4,325 3,164 3,643 2,298
Oklahoma 0 317 2,559 1,753
Oregon 0 0 0 554
Tennessee 1,829 332 (2) 0
Texas 10,660 3,464 10,122 3,864
Virginia 7,500 5,035 14,733 10,225
Washington 3,827 1,693 106 23
----- ----- --- ---
Total $158,499 $143,761 $231,154 $165,547
======== ======== ======== ========
The Company markets its nonstandard products exclusively through
approximately 6,000 independent agencies and focuses its marketing efforts in
rural areas and the peripheral areas of metropolitan centers. As part of its
strategy, management is continuing its efforts to establish the Company as a low
cost provider of nonstandard automobile insurance while maintaining a commitment
to provide quality service to both agents and insureds. This element of the
Company's strategy is being accomplished primarily through the automation of
certain marketing, underwriting and administrative functions. In order to
maintain and enhance its relationship with its agency base, the Company has 26
territorial managers, each of whom resides in a specific marketing region and
has access to the technology and software necessary to provide marketing, rating
and administrative support to the agencies in his or her region.
The Company attempts to foster strong service relationships with its
agencies and customers. The Company is currently completing its development of
computer software that will provide on-line communication with its agency force.
In addition, to deliver prompt service while ensuring consistent underwriting,
the Company offers rating software to its agents in some states which permits
them to evaluate risks in their offices. The agent has the authority to sell and
bind insurance coverages in accordance with procedures established by the
Company, which is a common practice in the nonstandard automobile insurance
business. The Company reviews all coverages bound by the agents promptly and
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generally accepts all coverages which fall within its stated underwriting
criteria. In most jurisdictions, the Company has the right within a specified
time period to cancel any policy even if the risk falls within its underwriting
criteria. See "Business -- Nonstandard Automobile Insurance -- Underwriting."
The Company compensates its agents by paying a commission based on a
percentage of premiums produced. The Company also offers its agents a contingent
commission based on volume and profitability, thereby encouraging the agents to
enhance the placement of profitable business with the Company.
The Company believes that the combination of Pafco with Superior and
its two Florida-domiciled insurance subsidiaries allows the Company the
flexibility to engage in multi-tiered marketing efforts in which specialized
automobile insurance products are directed toward specific segments of the
market. Since certain state insurance laws prohibit a single insurer from
offering similar products with different commission structures or, in some
cases, premium rates, it is necessary to have multiple licenses in certain
states in order to obtain the benefits of market segmentation. The Company is
currently offering multi-tiered products in Florida, Texas, Virginia, California
and Missouri. The Company intends to expand the marketing of its multi-tiered
products into other states and to obtain multiple licenses for its subsidiaries
in these states to permit maximum flexibility in designing commission
structures.
Underwriting
The Company underwrites its nonstandard automobile business with the
goal of achieving adequate pricing. The Company seeks to classify risks into
narrowly defined segments through the utilization of all available underwriting
criteria. The Company maintains an extensive, proprietary database which
contains statistical records with respect to its insureds on driving and repair
experience by location, class of driver and type of automobile. Management
believes this database gives the Company the ability to be more precise in the
underwriting and pricing of its products. Further, the Company uses motor
vehicle accident reporting agencies to verify accident history information
included in applications.
The Company utilizes many factors in determining its rates. Some of the
characteristics used are type, age and location of the vehicle, number of
vehicles per policyholder, number and type of convictions or accidents, limits
of liability, deductibles, and, where allowed by law, age, sex and marital
status of the insured. The rate approval process varies from state to state;
some states, such as Indiana, Colorado, Kentucky and Missouri, allow filing and
use of rates, while others, such as Florida, Arkansas and California, require
approval of the insurance department prior to the use of the rates.
The Company has begun to integrate its automated underwriting process
with the functions performed by its agency force. For example, the Company has
recently introduced a rating software package for use by agents in some states.
In many instances, this software package, combined with agent access to the
automated retrieval of motor vehicle reports, ensures accurate underwriting and
pricing at the point of sale. The Company believes the automated rating and
underwriting system provides a significant competitive advantage because it (i)
improves efficiencies for the agent and the Company, thereby reenforcing the
agents' commitment to the Company, (ii) makes more accurate and consistent
underwriting decisions possible and (iii) can be changed easily to reflect new
rates and underwriting guidelines.
Underwriting results of insurance companies are frequently measured by
their Combined Ratios. However, investment income, federal income taxes and
other non-underwriting income or expense are not reflected in the Combined
Ratio. The profitability of property and casualty insurance companies depends on
income from underwriting, investment and service operations. Underwriting
results are generally considered profitable when the Combined Ratio is under
100% and unprofitable when the Combined Ratio is over 100%. The following table
sets forth Loss and LAE Ratios, Expense Ratios and Combined Ratios for the
periods indicated for the nonstandard automobile insurance business of the
Company. The ratios exclude the effects of Superior prior to the acquisition by
the Company on April 30, 1996. The Ratios shown in the table below are computed
based upon GAAP. See "Recent Developments" for a discussion of adjustments to
operating results subsequent to June 30, 1997.
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Six Months Ended
Years Ended December 31, June 30,
------------------------ ------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
Loss and LAE Ratio 72.1% 73.8% 73.7% 73.5% 77.2%
Underwriting Expense Ratio,
net of billing fees 28.2% 32.3% 25.1% 25.4% 22.9%
----- ----- ----- ----- ------
Combined Ratio 100.3% 106.1% 98.8% 98.9% 99.3%
====== ====== ===== ===== =====
In an effort to maintain and improve underwriting profits, the
territorial managers regularly monitor loss ratios of the agencies in their
regions and meet periodically with the agencies in order to address any adverse
trends in Loss Ratios.
Claims
The Company's nonstandard automobile claims department handles claims
on a regional basis from its Indianapolis, Indiana; Atlanta, Georgia; Tampa,
Florida and Anaheim, California locations. Management believes that the
employment of salaried claims personnel, as opposed to independent adjusters,
results in reduced ultimate loss payments, lower LAE and improved customer
service. The Company generally retains independent appraisers and adjusters on
an as needed basis for estimation of physical damage claims and limited elements
of investigation. The Company uses the Audapoint, Audatex and Certified
Collateral Corporation computer programs to verify, through a central database,
the cost to repair a vehicle and to eliminate duplicate or "overlap" costs from
body shops. Autotrak, which is a national database of vehicles, allows the
Company to locate vehicles nearly identical in model, color and mileage to the
vehicle damaged in an accident, thereby reducing the frequency of disagreements
with claimants as to the replacement value of damaged vehicles. In 1995, the
Company implemented new claims handling procedures designed to reduce the number
of pending claims.
Claims settlement authority levels are established for each adjuster or
manager based on the employee's ability and level of experience. Upon receipt,
each claim is reviewed and assigned to an adjuster based on the type and
severity of the claim. All claim-related litigation is monitored by a home
office supervisor or litigation manager. The claims policy of the Company
emphasizes prompt and fair settlement of meritorious claims, appropriate
reserving for claims and controlling claims adjustment expenses.
Reinsurance
The Company follows the customary industry practice of reinsuring a
portion of its risks and paying for that protection based upon premiums received
on all policies subject to such Reinsurance. Insurance is ceded principally to
reduce the Company's exposure on large individual risks and to provide
protection against large losses, including catastrophic losses. Although
Reinsurance does not legally discharge the ceding insurer from its primary
obligation to pay the full amount of losses incurred under policies reinsured,
it does render the reinsurer liable to the insurer to the extent provided by the
terms of the Reinsurance treaty. As part of its internal procedures, the Company
evaluates the financial condition of each prospective reinsurer before it cedes
business to that carrier. Based on the Company's review of its reinsurers'
financial health and reputation in the insurance marketplace, the Company
believes its reinsurers are financially sound and that they therefore can meet
their obligations to the Company under the terms of the Reinsurance treaties.
Reserves for uncollectible Reinsurance are provided as deemed necessary.
Effective January 1, 1997, Pafco and Superior entered into a 20% quota
share Reinsurance treaty on its written and assumed nonstandard automobile
business by placing 90% of such Reinsurance with Vesta Fire Insurance Company
(rated "A" by A.M. Best) and 10% with an affiliate, Granite Re. In 1997, Pafco
and Superior continues to maintain excess of loss treaties on their nonstandard
automobile insurance business covering 100% of losses on an individual
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occurrence basis in excess of $200,000 up to a maximum of $5,000,000. As of June
30, 1997 neither Pafco nor Superior had any material Reinsurance recoverables.
On April 29, 1996, Pafco retroactively ceded all of its commercial
business relating to 1995 and previous years to Granite Reinsurance Company Ltd.
("Granite Re"), an affiliate, with an effective date of January 1, 1996. No gain
or loss was recognized from this portfolio transfer. On this date, Pafco also
entered into a 100% quota share Reinsurance agreement with Granite Re, whereby
all of Pafco's commercial business from 1996 and forward was ceded to Granite Re
effective January 1, 1996. Pafco has a Reinsurance recoverable at December 31,
1996 from Granite Re of $9,230,000, of which $770,000 was uncollateralized.
Granite Re subsequently provided appropriate and sufficient collateral in 1997
and maintained sufficient collateral at June 30, 1997.
Neither Pafco nor Superior has any facultative Reinsurance with respect
to its nonstandard automobile insurance business.
Competition
The Company competes with both large national and smaller regional
companies in each state in which it operates. The Company's competitors include
other companies which, like the Company, serve the agency market, as well as
companies which sell insurance directly to customers. Direct writers may have
certain competitive advantages over agency writers, including increased name
recognition, increased loyalty of their customer base and, potentially, reduced
acquisition costs. The Company's primary competitors are Progressive Casualty
Insurance Company, Guaranty National Insurance Company, Integon Corporation
Group, Deerbrook Insurance Company (a member of the Allstate Insurance Group)
and the companies of the American Financial Group. Generally, these competitors
are larger and have greater financial resources than the Company. The
nonstandard automobile insurance business is price sensitive and certain
competitors of the Company have, from time to time, decreased their prices in an
apparent attempt to gain market share. Although the Company's pricing is
inevitably influenced to some degree by that of its competitors, management of
the Company believes that it is generally not in the Company's best interest to
match such price decreases, choosing instead to compete on the basis of
underwriting criteria and superior service to its agents and insureds.
Crop Insurance
Industry Background
The two principal components of the Company's crop insurance business
are MPCI and private named peril, primarily crop hail insurance. Crop insurance
is purchased by farmers to reduce the risk of crop loss from adverse weather and
other uncontrollable events. Farms are subject to drought, floods and other
natural disasters that can cause widespread crop losses and, in severe cases,
force farmers out of business. Because many farmers rely on credit to finance
their purchases of such agricultural inputs as seed, fertilizer, machinery and
fuel, the loss of a crop to a natural disaster can reduce their ability to repay
these loans and to find sources of funding for the following year's operating
expenses.
MPCI was initiated by the federal government in the 1930s to help
protect farmers against loss of their crops as a result of drought, floods and
other natural disasters. In addition to MPCI, farmers whose crops are lost as a
result of natural disasters have, in the past, occasionally been supported by
the federal government in the form of ad hoc relief bills providing low interest
agricultural loans and direct payments. Prior to 1980, MPCI was available only
on major crops in major producing areas. In 1980, Congress expanded the scope
and coverage of the MPCI program. In addition, the delivery system for MPCI was
expanded to permit private insurance companies and licensed agents and brokers
to sell MPCI policies and the FCIC was authorized to reimburse participating
companies for their administrative expenses and to provide federal Reinsurance
for the majority of the risk assumed by such private companies.
Although expansion of the federal crop insurance program in 1980 was
expected to make crop insurance the farmer's primary risk management tool,
participation in the MPCI program was only 32% of eligible acreage in the 1993
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crop year. Due in part to low participation in the MPCI program, Congress
provided an average of $1.5 billion per year in ad hoc disaster payments over
the six years prior to 1994. In view of the combination of low participation
rates in the MPCI program and large federal payments on both crop insurance
(with an average loss ratio of 147%) and ad hoc disaster payments since 1980,
Congress has, since 1990, considered major reform of its crop insurance and
disaster assistance policies. The 1994 Reform Act was enacted in order to
increase participation in the MPCI program and eliminate the need for ad hoc
federal disaster relief payments to farmers.
The 1994 Reform Act required farmers for the first time to purchase at
least CAT Coverage (i.e., the minimum available level of MPCI providing coverage
for 50% of farmers' historic yield at 60% of the price per unit for such crop
set by the FCIC) in order to be eligible for other federally sponsored farm
benefits, including, but not limited to, low interest loans and crop price
supports. The 1994 Reform Act also authorized the marketing and selling of CAT
Coverage by the local USDA offices which has been eliminated for the 1998 crop
year.
The Federal Agriculture Improvement and Reform Act of 1996 ("the 1996
Reform Act"), signed into law by President Clinton in April 1996, limits the
role of the USDA offices in the delivery of MPCI coverage beginning in July
1996, which is the commencement of the 1997 crop year, and also eliminates the
linkage between CAT Coverage and qualification for certain federal farm program
benefits. This limitation should provide the Company with the opportunity to
realize increased revenues from the distribution and servicing of its MPCI
product. In accordance with the 1996 Reform Act, the USDA announced in July
1996, the following 14 states in which CAT Coverage will no longer be available
through USDA offices but rather will be solely available through private
companies: Arizona, Colorado, Illinois, Indiana, Iowa, Kansas, Minnesota,
Montana, Nebraska, North Carolina, North Dakota, South Dakota, Washington and
Wyoming. Through June 1996, the FCIC transferred to the Company approximately
8,900 insureds for CAT Coverage who previously purchased such coverage from USDA
field offices. The Company believes that any future potential negative impact of
the delinkage mandated by the 1996 Reform Act will be mitigated by, among other
factors, the likelihood that farmers will continue to purchase MPCI to provide
basic protection against natural disasters since ad hoc federal disaster relief
programs have been reduced or eliminated. In addition, the Company believes that
(i) lending institutions will likely continue to require this coverage as a
condition to crop lending and (ii) many of the farmers who entered the MPCI
program as a result of the 1994 Reform Act have come to appreciate the
reasonable price of the protection afforded by CAT Coverage and will remain with
the program regardless of delinkage. There can, however, be no assurance as to
the ultimate effect which the 1996 Reform Act may have on the business or
operations of the Company.
On June 9, 1997, the Secretary of Agriculture announced that the USDA
would no longer provide CAT Coverage through USDA offices in any state effective
for the 1998 crop year. This is to be implemented by a transferring of CAT
policies to the various members of the crop insurance industry. At this time,
the Company has been preliminarily informed that it will receive approximately
17,000 policies that were formerly written by USDA offices, although there can
be no assurance that the Company will receive this number of policies. Based on
historical, per- policy averages, the Company has preliminarily estimated that
it will receive an additional approximate $6 to $7 million in premium from such
transferred policies, however, there can be no assurance that this number will
be realized. This estimate assumes that IGF will retain 100% of such premiums.
There can be no assurance as to the ultimate effect which the 1996 Reform Act
may have on the business or operations of the Company.
Strategy
The Company has multiple strategies for its crop insurance operations,
including the following:
o The Company seeks to enhance underwriting profits and reduce
the volatility of its crop insurance business through
geographic diversification and the appropriate allocation of
risks among the federal reinsurance pools and the effective
use of federal and third-party catastrophic Reinsurance
arrangements.
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o The Company also limits the risks associated with crop
insurance through selective underwriting of crop risks based
on its historical loss experience data base.
o The Company continues to develop and maintain a proprietary
knowledge-based underwriting system which utilizes a database
of Company-specific underwriting rules.
o The Company has further strengthened its independent agency
network by using technology to provide fast, efficient service
to its agencies and providing application documentation
designed for simplicity and convenience.
o Unlike many of its competitors, the Company employs
approximately 85 full-time claims adjusters, most of whom are
agronomy-trained, to reduce the cost of losses experienced by
IGF.
o The Company stops selling its crop hail policies after certain
selected dates to prevent farmers from adversely selecting
against IGF when a storm is forecast or hail damage has
already occurred.
o The Company continues to explore growth opportunities and
product diversification through new specialty coverages,
including Crop Revenue Coverage (CRC) and specific named peril
crop insurance. Further, IGF is in the initial stages of
opening new markets and attracting new customers by developing
timber, crop completion and agricultural production
interruption coverages.
o The Company continues to explore new opportunities in
administrative efficiencies and product underwriting made
possible by advances in Precision Farming software, Global
Positioning System (GPS) software and Geographical Information
System (GIS) technology, all of which continue to be adopted
by insureds in their farming practices.
Products
MPCI is a federally subsidized program which is designed to provide
participating farmers who suffer insured crop damage with funds needed to
continue operating and plant crops for the next growing season. All of the
material terms of the MPCI program and of the participation of private insurers,
such as the Company, in the program are set by the FCIC under applicable law.
MPCI provides coverage for insured crops against substantially all natural
perils. Purchasing an MPCI policy permits a farmer to insure against the risk
that his crop yield for any growing season will be less than 50% to 75% (as
selected by the farmer at the time of policy application or renewal) of his
historic crop yield. If a farmer's crop yield for the year is greater than the
yield coverage he selected, no payment is made to the farmer under the MPCI
program. However, if a farmer's crop yield for the year is less than the yield
coverage selected, MPCI entitles the farmer to a payment equal to the yield
shortfall multiplied by 60% to 100% of the price for such crop (as selected by
the farmer at the time of policy application or renewal) for that season as set
by the FCIC.
In order to encourage farmers to participate in the MPCI program and
thereby reduce dependence on traditional disaster relief measures, the 1994
Reform Act established CAT Coverage as a new minimum level of MPCI coverage,
which farmers may purchase upon payment of a fixed administrative fee of $50 per
policy instead of any premium. CAT Coverage insures 50% of historic crop yield
at 60% of the FCIC-set crop price for the applicable commodities standard unit
of measure, i.e., bushel, pound, etc. CAT Coverage can be obtained from private
insurers such as the Company.
In addition to CAT Coverage, MPCI policies that provide a greater level
of protection than the CAT Coverage level are also offered ("Buy-up Coverage").
Most farmers purchasing MPCI have historically purchased at Buy-up Coverage
levels, with the most frequently sold policy providing coverage for 65% of
historic crop yield at 100% of the FCIC-set crop price per bushel. Buy-up
Coverages require payment of a premium in an amount determined by a formula set
by the FCIC. Buy-up Coverage can only be purchased from private insurers. The
Company focuses its marketing
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efforts on Buy-up Coverages, which have higher premiums and which the Company
believes will continue to appeal to farmers who desire, or whose lenders
encourage or require, revenue protection.
The number of MPCI Buy-up policies written has historically tended to
increase after a year in which a major natural disaster adversely affecting
crops occurs and to decrease following a year in which favorable weather
conditions prevail.
The Company, like other private insurers participating in the MPCI
program, generates revenues from the MPCI program in two ways. First, it
markets, issues and administers policies, for which it receives administrative
fees; and second, it participates in a profit-sharing arrangement in which it
receives from the government a portion of the aggregate profit, or pays a
portion of the aggregate loss, in respect of the business it writes.
The Company's share of profit or loss on the MPCI business it writes is
determined under a complex profit sharing formula established by the FCIC. Under
this formula, the primary factors that determine the Company's MPCI profit or
loss share are (i) the gross premiums the Company is credited with having
written, (ii) the amount of such credited premiums retained by the Company after
ceding premiums to certain federal reinsurance pools and (iii) the loss
experience of the Company's insureds. The following discussion provides more
detail about the implementation of this profit sharing formula.
Gross Premiums
For each year, the FCIC sets the formulas for determining premiums for
different levels of Buy-up Coverage. Premiums are based on the type of crop,
acreage planted, farm location, price per bushel for the insured crop as set by
the FCIC for that year and other factors. The federal government will generally
subsidize a portion of the total premium set by the FCIC and require farmers to
pay the remainder. Cash premiums are received by the Company from farmers only
after the end of a growing season and are then promptly remitted to the federal
government. Although applicable federal subsidies change from year to year, such
subsidies will range up to approximately 40% of the Buy-up Coverage premium
depending on the crop insured and the level of Buy-up Coverage purchased, if
any. Federal premium subsidies are recorded on the Company's behalf by the
government. For purposes of the profit sharing formula, the Company is credited
with having written the full amount of premiums paid by farmers for Buy-up
Coverages, plus the amount of any related federal premium subsidies (such total
amount, its "MPCI Premium").
As previously noted, farmers pay an administrative fee of $50 per
policy but are not required to pay any premium for CAT Coverage. However, for
purposes of the profit sharing formula, the Company is credited with an imputed
premium (its "MPCI Imputed Premium") for all CAT Coverages it sells. The amount
of such MPCI Imputed Premium credited is determined by formula. In general, such
MPCI Imputed Premium will be less than 50% of the premium that would be payable
for a Buy-up Coverage policy that insured 65% of historic crop yield at 100% of
the FCIC-set crop price per standard unit of measure for the commodity,
historically the most frequently sold Buy-up Coverage. For income statement
purposes under GAAP, the Company's Gross Premiums Written for MPCI consist only
of its MPCI Premiums and do not include MPCI Imputed Premiums.
Reinsurance Pools
Under the MPCI program, the Company must allocate its MPCI Premium or
MPCI Imputed Premium in respect of a farm to one of three federal reinsurance
pools, at its discretion. These pools provide private insurers with different
levels of Reinsurance protection from the FCIC on the business they have
written. For insured farms allocated to the "Commercial Pool," the Company, at
its election, generally retains 50% to 100% of the risk and the FCIC assumes 0%
- - 50% of the risk; for those allocated to the "Developmental Pool," the Company
generally retains 35% of the risk and the FCIC assumes 65%; and for those
allocated to the "Assigned Risk Pool," the Company retains 20% of the risk and
the FCIC assumes 80%. The MPCI Retention is protected by private third-party
stop-loss treaties.
Although the Company in general must agree to insure any eligible farm,
it is not restricted in its decision to allocate a risk to any of the three
pools, subject to a minimum aggregate retention of 35% of its MPCI Premiums and
MPCI Imputed Premiums written. The Company uses a sophisticated methodology
derived from a comprehensive
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historical data base to allocate MPCI risks to the federal reinsurance pools in
an effort to enhance the underwriting profits realized from this business. The
Company has crop yield history information with respect to over 100,000 farms in
the United States. Generally, farms or crops which, based on historical
experience, location and other factors, appear to have a favorable net loss
ratio and to be less likely to suffer an insured loss, are placed in the
Commercial Pool. Farms or crops which appear to be more likely to suffer a loss
are placed in the Developmental Pool or Assigned Risk Pool. The Company has
historically allocated the bulk of its insured risks to the Commercial Pool.
The Company's share of profit or loss depends on the aggregate amount
of MPCI Premium and MPCI Imputed Premium on which the Company retains risk after
allocating farms to the foregoing pools (its "MPCI Retention"). As previously
described, the Company purchases Reinsurance from third parties other than the
FCIC to further reduce its MPCI loss exposure.
Loss Experience of Insureds
Under the MPCI program the Company pays losses to farmers through a
federally funded escrow account as they are incurred during the growing season.
The Company requests funding of the escrow account when a claim is settled and
the escrow account is funded by the federal government within three business
days. After a growing season ends, the aggregate loss experience of the
Company's insureds in each state for risks allocated to each of the three
Reinsurance pools is determined. If, for all risks allocated to a particular
pool in a particular state, the Company's share of losses incurred is less than
its aggregate MPCI Retention, the Company shares in the gross amount of such
profit according to a schedule set by the FCIC for each year. The profit and
loss sharing percentages are different for risks allocated to each of the three
Reinsurance pools and private insurers will receive or pay the greatest
percentage of profit or loss for risks allocated to the Commercial Pool.
The percentage split between private insurers and the federal
government of any profit or loss that emerges from an MPCI Retention is set by
the FCIC and generally is adjusted from year to year. For 1995, 1996 and 1997
crop years, the FCIC increased the maximum potential profit share of private
insurers for risks allocated to the Commercial Pool above the maximum potential
profit share set for 1994, without increasing the maximum potential share of
loss for risks allocated to that pool for 1995. This change increased the
potential profitability of risks allocated to the Commercial Pool by private
insurers.
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The following table presents MPCI Premiums, MPCI Imputed Premiums and
underwriting gains or losses of IGF for the periods indicated:
Six Months Ended
(in thousands) Year Ended December 31, June 30,
--------------------------- ---------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
MPCI premiums $44,325 $53,408 $82,102 $62,951 $79,017
MPCI imputed premiums $2,171 $19,552 $38,944 $14,104 $26,063
Gross underwriting gain $4,344 $10,870 $15,801 $3,105 $6,930
Net private third party
reinsurance expense and
other (1,087) (1,217) (3,524) (1,495) (1,690)
------- ------- ------- ------- -------
Net underwriting gain $3,257 $9,653 $12,277 $1,610 $5,240
===== ===== ====== ===== =====
MPCI Fees and Reimbursement Payments
The Company receives Buy-up Expense Reimbursement Payments from the
FCIC for writing and administering Buy-up Coverage policies. These payments
provide funds to compensate the Company for its expenses, including agents'
commissions and the costs of administering policies and adjusting claims. For
1994, 1995 and 1996, the maximum Buy-up Expense Reimbursement Payment had been
set at 31% of the MPCI Premium, was 28% for the 1997 Crop Year and is currently
under review and subject to change for the 1998 Crop Year. Historically, the
FCIC has paid the maximum MPCI Buy-up Expense Reimbursement Payment rate
allowable under law, although no assurance can be given that this practice will
continue. Although the 1994 Reform Act directs the FCIC to alter program
procedures and administrative requirements so that the administrative and
operating costs of private insurance companies participating in the MPCI program
will be reduced in an amount that corresponds to the reduction in the expense
reimbursement rate, there can be no assurance that the Company's actual costs
will not exceed the expense reimbursement rate.
The crop insurance industry has recently completed negotiation of the
1998 Standard Reinsurance Agreement ("1998 SRA") with the FCIC, with the 1998
SRA providing for a 27% MPCI Expense Reimbursement and no change to the CAT
Coverage program from prior years.
Farmers are required to pay a fixed administrative fee of $50 per
policy (maximum of $100 per county) in order to obtain CAT Coverage. This fee is
retained by the Company to defray the cost of administration and policy
acquisition. The Company also receives from the FCIC a separate CAT LAE
Reimbursement Payment equal to approximately 13.0% of MPCI Imputed Premiums in
respect of each CAT Coverage policy it writes and a small MPCI Excess LAE
Reimbursement Payment. In general, fees and payments received by the Company in
respect of CAT Coverage are significantly lower than those received for Buy-up
Coverage.
In addition to premium revenues, the Company received the following
fees and commissions from its crop insurance segment for the periods indicated:
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Six Months Ended
(in thousands) Years Ended December 31, June 30,
---------------------------- ----------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
CAT Coverage Fees (1) $74 $1,298 $1,181 $941 $1,074
Buy-up Expense Reimbursement
Payments 13,845 16,366 24,971 19,402 23,206
CAT LAE Reimbursement Payments
and MPCI Excess LAE
Reimbursement Payments 107 3,427 5,753 1,646 3,553
--- ----- ----- ----- -----
Total $14,026 $21,091 $31,905 $21,989 $27,833
====== ====== ====== ====== ======
- ---------------
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company" for a discussion of the
accounting treatment accorded to the crop insurance business.
Crop Revenue Coverage
The Company recently began offering a new product in its crop insurance
business called Crop Revenue Coverage ("CRC"). In contrast to standard MPCI
coverage, which features a yield guarantee or coverage for the loss of
production, CRC provides the insured with a guaranteed revenue stream by
combining both yield and price variability protection. CRC protects against a
grower's loss of revenue resulting from fluctuating crop prices and/or low
yields by providing coverage when any combination of crop yield and price
results in revenue that is less than the revenue guarantee provided by the
policy. CRC was approved by the FCIC as a pilot program for revenue insurance
coverage plans for the 1996 Crop Year and has been available for corn and
soybeans in all counties in Iowa and Nebraska since 1996. CRC policies
represented approximately 30% of the combined corn policies written by IGF in
Iowa and Nebraska since 1996. Since July 1996, CRC was made available for winter
wheat in the entire states of Kansas, Michigan, Nebraska, South Dakota, Texas
and Washington and in parts of Montana. In May 1997, the FCIC announced that CRC
will be expanded to include wheat in twenty-five additional states. Currently,
CRC represents approximately 10% of all of the Company's wheat policies.
Revenue insurance coverage plans such as CRC are the result of the 1994
Reform Act, which directed the FCIC to develop a pilot crop insurance program
providing coverage against loss of gross income as a result of reduced yield
and/or price. CRC was developed by a private insurance company other than the
Company under the auspices of this pilot program, which authorizes private
companies to design alternative revenue coverage plans and to submit them for
review, approval and endorsement by the FCIC. As a result, although CRC is
administered and reinsured by the FCIC and risks are allocated to the federal
reinsurance pools, CRC remains partially influenced by the private sector,
particularly with respect to changes in its rating structure.
CRC plans to use the policy terms and conditions of the Actual
Production History ("APH") plan of MPCI as the basic provisions for coverage.
The APH provides the yield component by utilizing the insured's historic yield
records. The CRC revenue guarantee is the producer's approved APH times the
coverage level, times the higher of the spring futures price or harvest futures
price (in each case, for post-harvest delivery) of the insured crop for each
unit of farmland. The coverage levels and exclusions in a CRC policy are similar
to those in a standard MPCI policy. For the 1997 Crop Year, the Company received
from the FCIC an expense reimbursement payment equal to 25% of Gross Premiums
Written in respect of each CRC policy it writes. The MPCI Buy-up Expense
Reimbursement Payment is currently administratively established by FCIC in the
absence of a applicable legislation. This expense reimbursement payment was
reduced from 27% in 1996.
CRC protects revenues by extending crop insurance protection based on
APH to include price as well as yield variability. Unlike MPCI, in which the
crop price component of the coverage is set by the FCIC prior to the growing
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<PAGE>
season and generally does not reflect actual crop prices, CRC uses the commodity
futures market as the basis for its pricing component. Pricing occurs twice in
the CRC plan. The spring futures price is used to establish the initial policy
revenue guarantee and premium, and the harvest futures price is used to
establish the crop value to count against the revenue guarantee and to recompute
the revenue guarantee (and resulting indemnity payments) when the harvest price
is higher than the spring price.
Crop Hail
In addition to MPCI, the Company offers stand alone crop hail
insurance, which insures growing crops against damage resulting from hail storms
and which involves no federal participation, as well as its proprietary
HAILPLUS(R) product which combines the application and underwriting process for
MPCI and hail coverages. The HAILPLUS(R) product tends to produce less volatile
loss ratios than the stand alone product since the combined product generally
insures a greater number of acres, thereby spreading the risk of damage over a
larger insured area. Approximately 50% of IGF's hail policies are written in
combination with MPCI. Although both crop hail and MPCI provide insurance
against hail damage, under crop hail coverages farmers can receive payments for
hail damage which would not be severe enough to require a payment under an MPCI
policy. The Company believes that offering crop hail insurance enables it to
sell more MPCI policies than it otherwise would.
Named Peril
In addition to crop hail insurance, the Company also sells a small
volume of insurance against crop damage from other specific named perils. These
products cover specific crops, including hybrid seed corn, cranberries, cotton,
sugar cane, sugar beets, citrus, tomatoes and onions and are generally written
on terms that are specific to the kind of crops and farming practices involved
and the amount of actuarial data available. The Company plans to seek potential
growth opportunities in this niche market by developing basic policies on a
diverse number of named crops grown in a variety of geographic areas and to
offer these polices primarily to large producers through certain select agents.
The Company's experienced product development team will develop the underwriting
criteria and actuarial rates for the named peril coverages. As with the
Company's other crop insurance products, loss adjustment procedures for named
peril policies are handled by full-time professional claims adjusters who have
specific agronomy training with respect to the crop and farming practice
involved in the coverage. IGF is currently in the initial stages of opening new
markets and attracting new customers by developing timber, crop completion and
agricultural production interruption coverages.
Third-Party Reinsurance In Effect for 1997
In order to reduce the Company's potential loss exposure under the MPCI
program, the Company purchases stop loss Reinsurance from other private
reinsurers in addition to Reinsurance obtained from the FCIC. In addition, since
the FCIC and state regulatory authorities require IGF to limit its aggregate
writings of MPCI Premiums and MPCI Imputed Premiums to no more than 900% of
capital, and retain a net loss exposure of not in excess of 50% of capital, IGF
may also obtain Reinsurance from private reinsurers in order to permit it to
increase its premium writings. Such private Reinsurance would not eliminate the
Company's potential liability in the event a reinsurer was unable to pay or
losses exceeded the limits of the stop loss coverage. For crop hail insurance,
the Company has in effect quota share Reinsurance of 40% of business, although
the reinsurer is only liable to participate in losses of the Company up to a
150% pure loss ratio. The Company also has stop loss treaties for its crop hail
business which reinsure net losses in excess of an 80% pure Loss Ratio to 130%
at 95% coverage with IGF retaining the remaining 5%. With respect to its MPCI
business, the Company has stop loss treaties which reinsure 93.75% of the
underwriting losses experienced by the Company to the extent that aggregate
losses of its insureds nationwide are in excess of 100% of the Company's MPCI
Retention up to 125% of MPCI Retention. The Company also has an additional layer
of MPCI stop loss Reinsurance which covers 95% of the underwriting losses
experienced by the Company to the extent that aggregate losses of its insureds
nationwide are in excess of 125% of MPCI Retention up to 160% of MPCI Retention.
Based on a review of the reinsurers' financial health and reputation in
the insurance marketplace, the Company believes that the reinsurers for its crop
insurance business are financially sound and that they therefor can meet their
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<PAGE>
obligations to the Company under the terms of the Reinsurance treaties. Reserves
for uncollectible Reinsurance are provided as deemed necessary. The following
table provides information with respect to ceded premiums in excess of $250,000
on crop hail and named perils and for any affiliates.
Six Months Ended June 30, 1997 (1)
(in thousands, except footnotes)
A.M. Best Ceded
Reinsurers Rating Premiums
- ---------- ------ --------
Folksam International Insurance Co. Ltd. (2) A- $578
Frankona Ruckversicherungs AG (3) A $298
Granite Re (4) Not Rated $758
Liberty Mutual Insurance Co. (UK) Ltd. A $308
Monde Re (5) Not Rated $3,226
Munich Re (6) A+ $2,309
National Grange A- $574
Partner Reinsurance Company Ltd. A $430
R & V Versicherung AG (5) Not Rated $958
Reinsurance Australia Corporation, Ltd. (REAC) (5) Not Rated $3,740
Scandinavian Reinsurance Company Ltd. A+ $719
- ---------------
(1) For the six months ended June 30, 1997, total ceded premiums were
$91,676,000.
(2) An A.M. Best rating of "A-" is the fourth highest of 15 ratings.
(3) An A.M. Best rating of "A" is the third highest of 15 ratings.
(4) Granite Re is an affiliate of the Company.
(5) Monde Re is owned by REAC.
(6) An A.M. Best rating of "A+" is the second highest of 15 ratings.
As of June 30, 1997, IGF's Reinsurance recoverables aggregated
approximately $63,000 excluding recoverables from the FCIC.
Marketing; Distribution Network
IGF markets its products to the owners and operators of farms in 39
states through approximately 2,500 agents associated with approximately 1,500
independent insurance agencies, with its primary geographic concentration in the
states of Iowa, Texas, Illinois, Kansas and Minnesota. The Company has, however,
begun to diversify outside of the Midwest and Texas in order to reduce the risk
associated with geographic concentration. IGF is licensed in twenty states and
markets its products in additional states through a fronting agreement with a
third-party insurance company. IGF has a stable agency base and it experienced
negligible turnover in its agencies in 1997. Through its agencies, IGF targets
farmers with an acreage base of at least 1,000 acres. Such larger farms
typically have a lower risk exposure since they
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tend to utilize better farming practices and to have noncontiguous acreage,
thereby making it less likely that the entire farm will be affected by a
particular occurrence. Many farmers with large farms tend to buy or rent acreage
which is increasingly distant from the central farm location. Accordingly, the
likelihood of a major storm (wind, rain or hail) or a freeze affecting all of a
particular farmer's acreage decreases.
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The following table presents MPCI and crop hail premiums written by IGF
by state for the periods indicated.
<TABLE>
(in thousands)
-------------------------------------------------------------------------------------------------------------------
Year Ended Six Months Ended Six Months Ended
December 31, 1996 June 30, 1996 June 30, 1997
------------------------------------- ------------------------------------ -------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
State Crop MPCI Total Crop MPCI Total Crop MPCI Total
- ----- ---- ---- ----- ---- ---- ----- ---- ---- -----
Hail Hail Hail
---- ---- ----
Alabama $97 $2,951 $3,048 $38 $2,332 $2,370 $64 $1,298 $1,362
Arkansas 314 1,784 2,098 298 2,025 2,323 526 2,191 2,717
California 1,164 1,992 3,156 45 --- 45 671 4,284 4,955
Colorado 1,651 3,334 4,985 760 2,524 3,284 837 1,655 2,492
Florida --- 1,738 1,738 --- 186 186 --- 1,711 1,711
Illinois 526 11,228 11,754 207 8,491 8,698 328 8,965 9,293
Indiana 115 3,870 3,985 9 2,161 2,170 7 2,258 2,265
Iowa 6,590 15,205 21,795 3,481 10,922 14,403 4,465 11,716 16,181
Kansas 662 5,249 5,911 477 2,905 3,382 807 2,242 3,049
Louisiana 28 1,674 1,702 35 2,166 2,201 20 1,775 1,795
Minnesota 2,300 2,244 4,544 1,993 2,527 4,520 3,399 3,698 7,097
Mississippi 482 2,222 2,704 480 1,758 2,238 515 1,689 2,204
Missouri 556 2,427 2,983 313 1,878 2,191 222 2,322 2,544
Montana 5,632 1,554 7,186 3,655 711 4,366 2,451 1,609 4,060
Nebraska 1,567 3,206 4,773 1,086 2,282 3,368 1,225 3,365 4,590
North
Dakota 2,294 2,796 5,090 1,231 2,457 3,688 605 2,800 3,405
Oklahoma 403 1,436 1,839 360 1,214 1,574 350 748 1,098
South
Dakota 1,457 1,106 2,563 1,291 969 2,260 859 2,594 3,453
Texas 1,262 12,361 13,623 1,084 12,206 13,290 2,348 17,015 19,363
Wisconsin 370 2,187 2,557 351 1,972 2,323 308 1,573 1,881
All Other 487 1,538 2,025 426 1,265 1,691 9,332 3,509 12,841
--- ----- ----- --- ----- ----- ----- ----- ------
Total $27,957 $82,102 $110,059 $17,620 $62,951 $80,571 $29,339 $79,017 $108,356
====== ====== ======= ====== ====== ====== ====== ====== =======
</TABLE>
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The Company seeks to maintain and develop its agency relationships by
providing agencies with faster, more efficient service as well as marketing
support. IGF owns an IBM AS400 along with all peripheral and networking
equipment and has developed its own proprietary software package, APlus, which
allows agencies to quote and examine various levels of coverage on their own
personal computers. The Company's regional managers are responsible for the
Company's field operations within an assigned geographic territory, including
maintaining and enhancing relationships with agencies in those territories. IGF
also uses application documentation which is designed for simplicity and
convenience. The Company believes that IGF is the only crop insurer which has
created a single application for MPCI, crop hail and named peril coverage.
IGF generally compensates its agents based on a percentage of premiums
produced and, in the case of CAT Coverage and crop hail insurance, a percentage
of underwriting gain realized with respect to business produced. This
compensation structure is designed to encourage agents to place profitable
business with IGF (which tends to be insurance coverages for larger farms with
respect to which the risk of loss is spread over larger, frequently
noncontiguous insured areas).
Underwriting Management
Because of the highly regulated nature of the MPCI program and the fact
that rates are established by the FCIC, the primary underwriting functions
performed by the Company's personnel with respect to MPCI coverage are (i)
selecting of marketing territories for MPCI based on the type of crops being
grown in the area, typical weather patterns and loss experience of both agencies
and farmers within a particular area, (ii) recruiting agencies within those
marketing territories which service larger farms and other more desirable risks
and (iii) ensuring that policies are underwritten in accordance with the FCIC
rules.
With respect to its hail coverage, IGF seeks to minimize its
underwriting losses by maintaining an adequate geographic spread of risk by rate
group. In addition, IGF establishes sales closing dates after which hail
policies will not be sold. These dates are dependent on planting schedules, vary
by geographic location and range from May 15 in Texas to July 15 in North
Dakota. Prior to these dates, crops are either seeds in the ground or young
growth newly emerged from the ground and hail damage to crops in either of these
stages of growth is minimal. The cut-off dates prevent farmers from adversely
selecting against IGF by waiting to purchase hail coverage until a storm is
forecast or damage has occurred. For its hail coverage, IGF also sets limits by
policy ($400,000 each) and by township ($2.0 million per township). The Company
also uses a daily report entitled "Severe Weather Digest" which shows the time
and geographic location of all extraordinary weather events to check incoming
policy applications against possible previous damage.
Claims/Loss Adjustments
In contrast to most of its competitors who retain independent adjusters
on a part-time basis for loss adjusting services, IGF employs full-time
professional claims adjusters, most of whom are agronomy trained, as well as
part-time adjusters. Management believes that the professionalism of the IGF
full-time claims staff coupled with their exclusive commitment to IGF helps to
ensure that claims are handled in a manner designed to reduce overpayment of
losses experienced by IGF. The adjusters are located throughout IGF's marketing
territories. In order to promote a rapid claims response, the Company has
available several small four wheel drive vehicles for use by its adjusters. The
adjusters report to a field service representative in their territory who
manages adjusters' assignments, assures that all preliminary estimates for loss
reserves are accurately reported and assists in loss adjustment. Within 72 hours
of reported damage, a loss notice is reviewed by an IGF service office claims
manager and a preliminary loss reserve is determined which is based on the
representative's and/or adjuster's knowledge of the area or the particular storm
which caused the loss. Generally, within approximately two weeks, hail and MPCI
claims are examined and reviewed on site by an adjuster and the insured signs a
proof of loss form containing a final release. As part of the adjustment
process, IGF's adjusters use Global Positioning System Units, which are hand
held devices using navigation satellites to determine the precise location where
a claimed loss has occurred. IGF has a team of catastrophic claims specialists
who
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are available on 48 hours notice to travel to any of IGF's six regional service
offices to assist in heavy claim work load situations.
Competition
The crop insurance industry is highly competitive. The Company competes
against other private companies for MPCI, crop hail and named peril coverage.
Many of the Company's competitors have substantially greater financial and other
resources than the Company and there can be no assurance that the Company will
be able to compete effectively against such competitors in the future. The
Company competes on the basis of the commissions paid to agents, the speed with
which claims are paid, the quality and extent of services offered, the
reputation and experience of its agency network and, in the case of private
insurance, policy rates. Because the FCIC establishes the rates that may be
offered for MPCI policies, the Company believes that quality of service and
level of commissions offered to agents are the principal factors on which it
competes in the area of MPCI. The Company believes that the crop hail and other
named peril crop insurance industry is extremely rate-sensitive and the ability
to offer competitive rate structures to agents is a critical factor in the
agent's ability to write crop hail and other named peril premiums. Because of
the varying state laws regarding the ability of agents to write crop hail and
other named peril premiums prior to completion of rate and form filings (and, in
some cases, state approval of such filings), a company may not be able to write
its expected premium volume if its rates are not competitive.
The crop insurance industry has become increasingly consolidated. From
the 1985 crop year to the 1996 crop year, the number of insurance companies
having agreements with the FCIC to sell and service MPCI policies has declined
from fifty to seventeen. The Company believes that IGF is the fifth largest MPCI
crop insurer in the United States based on premium information compiled in 1995
by the FCIC and NCIS. The Company's primary competitors are Rain & Hail
Insurance Service, Inc. (affiliated with Cigna Insurance Company), Rural
Community Insurance Services, Inc. (which is owned by Norwest Corporation),
American Growers Insurance Company (Redland), Crop Growers Insurance, Inc.,
Great American Insurance Company, Blakely Crop Hail (an affiliate of Farmers
Alliance Mutual Insurance Company) and North Central Crop Insurance, Inc. The
Company believes that in order to compete successfully in the crop insurance
business it will have to market and service a volume of premiums sufficiently
large to enable the Company to continue to realize operating efficiencies in
conducting its business. No assurance can be given that the Company will be able
to compete successfully if this market further consolidates.
Reserves for Losses and Loss Adjustment Expenses
Loss Reserves are estimates, established at a given point in time based
on facts then known, of what an insurer predicts its exposure to be in
connection with incurred losses. LAE Reserves are estimates of the ultimate
liability associated with the expense of settling all claims, including
investigation and litigation costs resulting from such claims. The actual
liability of an insurer for its Losses and LAE Reserves at any point in time
will be greater or less than these estimates.
The Company maintains reserves for the eventual payment of Losses and
LAE with respect to both reported and unreported claims. Nonstandard automobile
reserves for reported claims are established on a case-by-case basis. The
reserving process takes into account the type of claim, policy provisions
relating to the type of loss and historical paid Loss and LAE for similar
claims. Reported crop insurance claims are reserved based upon preliminary
notice to the Company and investigation of the loss in the field. The ultimate
settlement of a crop loss is based upon either the value or the yield of the
crop.
Loss and LAE Reserves for claims that have been incurred but not
reported are estimated based on many variables including historical and
statistical information, inflation, legal developments, economic conditions,
trends in claim severity and frequency and other factors that could affect the
adequacy of loss reserves.
The Company's reserves are reviewed by independent actuaries on a
semi-annual basis. The Company's carried claims reserves are certified by the
independent actuaries for each calendar year.
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The following loss reserve development tables illustrate the change
over time of reserves established for claims and claims expense at the end of
various calendar years for the nonstandard automobile segment of the Company
(not including Superior) and for Superior separately. The first three line items
show the reserves as originally reported at the end of the stated year. The
table also includes the cumulative amounts paid as of the end of successive
years with respect to that reserve liability. The "liabilities reestimated"
section indicates reestimates of the original recorded reserve as of the end of
each successive year based on additional information pertaining to such
liabilities. The last portion of the table compares the latest reestimated
reserve to the reserve amount as originally established and indicates whether
the original recorded amount was adequate or inadequate to cover the estimated
costs of unsettled claims.
During the first half of 1997, and most noticeably in the second
quarter of 1997, the Company, as part of its efforts to reduce costs and combine
the operations of the two nonstandard automobile insurance companies, has
combined the claims settlement practices as well as the reserving philosophies
of Superior and Pafco. Superior had historically provided higher case reserves
and lower IBNR levels than Pafco while paying claims in a manner where such
payments were generally less than applicable reserves. Pafco had historically
carried adequate reserves while paying claims in a manner where such payments
were generally greater than applicable reserves. In connection with this change
in claims management philosophy, the Company recorded additional Loss and LAE
Reserves, relating primarily to operations at Pafco, resulting in an after tax
charge to earnings of approximately $1.8 million or $0.17 per share in the
second quarter of 1997. While the Company believes these actions are necessary,
the establishment and monitoring of reserve levels is a highly subjective
process involving numerous assumptions and estimates. Therefore, actual results
may ultimately differ from current estimates.
The reserve for claims and claims expense is an accumulation of the
estimated amounts necessary to settle all outstanding claims as of the date for
which the reserve is stated. The reserve and payment data shown below have been
reduced for estimated subrogation and salvage recoveries. The reserve estimates
are based upon the factors in each case and experience with similar cases. No
attempt is made to isolate explicitly the impact of inflation from the multitude
of factors influencing the reserve estimates though inflation is implicitly
included in the estimates. The Company and Superior regularly update their
reserve forecasts by type of claim as new facts become known and events occur
which affect unsettled claims. The Company and Superior do not discount their
reserves for unpaid claims and claims expense.
The following loss reserve development tables are cumulative and,
therefor, ending balances should not be added since the amount at the end of
each calendar year includes activity for both the current and prior years.
Conditions and trends that have affected the development of liability in the
past may not necessarily reoccur in the future. Accordingly, it may not be
appropriate to extrapolate future redundancies or deficiencies from the table.
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<PAGE>
<TABLE>
Symons International Group, Inc.
Nonstandard Automobile Insurance Only (Not Including Superior)
For The Years Ended December 31,
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Gross Reserves for Unpaid
Losses and LAE 26,819 30,844 27,145
Deduct: Reinsurance
recoverable 10,297 9,921 8,124
Reserve for unpaid losses and
LAE, net of reinsurance 4,748 10,775 14,346 17,083 17,499 18,706 16,544 16,522 20,923 19,021
Paid cumulative as of:
One Year Later 2,517 6,159 7,606 7,475 8,781 10,312 9,204 9,059 8,082
Two Years Later 4,318 7,510 10,388 10,930 12,723 14,934 12,966 8,806
Three Years Later 4,433 7,875 12,107 12,497 14,461 16,845 13,142
Four Years Later 4,146 8,225 12,863 13,271 15,071 16,641
Five Years Later 4,154 8,513 13,147 13,503 14,903
Six Years Later 4,297 8,546 13,237 13,500
Seven Years Later 4,297 8,561 13,238
Eight Years Later 4,295 8,561
Nine Years Later 4,295
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Liabilities reestimated as
of:
One Year Later 3,434 11,208 15,060 15,103 16,797 18,872 16,747 17,000 21,748
Two Years Later 4,588 11,413 14,178 14,745 16,943 19,599 17,023 17,443
Three Years Later 4,702 10,923 14,236 14,993 16,914 19,662 17,009
Four Years Later 4,311 10,791 14,479 14,809 16,750 19,651
Five Years Later 4,234 10,877 14,436 14,659 16,746
Six Years Later 4,320 10,825 14,368 14,659
Seven Years Later 4,278 10,922 14,368
Eight Years Later 4,309 10,921
Nine Years Later 4,309
Net cumulative (deficiency)
or redundancy 439 (146) (22) 2,424 753 (945) (465) (921) (825)
Expressed as a percentage of
unpaid losses and LAE 9.2% (1.4%) (0.2%) 14.2% 4.3% (5.1%) (2.8%) (5.6%) (3.9%)
</TABLE>
Net reserves for the nonstandard automobile business of the Company
increased substantially in 1988, 1989, 1990 and 1995. Such changes were due
entirely to changes in the premium volume of the nonstandard automobile business
for those years. In general, the Company's nonstandard automobile segment has
not developed significant redundancies or deficiencies as compared to original
reserves. A deficiency of $921,000, or 5.6%, of original reserves developed with
respect to loss reserves at December 31, 1994 due to an unexpected increase in
loss severity and average claim cost.
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<TABLE>
Superior Insurance Company
For The Years Ended December 31,
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Gross Reserves for Unpaid
Losses and LAE 52,610 54,577 47,112 52,413
Deduct: Reinsurance 68 1,090 987 0
Recoverabel Reserve for
unpaid losses and
LAE, net of reinsurance 26,245 37,851 56,424 60,118 60,224 56,803 52,542 53,487 46,125 52,413
Paid cumulative as of:
One Year Later 18,202 23,265 31,544 33,275 31,484 30,689 32,313 28,227 25,454
Two Years Later 25,526 34,122 43,547 44,128 40,513 41,231 38,908 35,141
Three Years Later 29,670 39,524 48,037 47,442 44,183 43,198 41,107
Four Years Later 32,545 41,257 49,064 49,256 44,708 44,010
Five Years Later 33,242 41,492 49,522 49,365 45,196
Six Years Later 33,395 41,716 49,327 49,476
Seven Years Later 33,535 41,576 49,425
Eight Years Later 33,469 41,621
Nine Years Later 33,408
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Liabilities reestimated as
of:
One Year Later 31,911 48,376 54,858 58,158 53,515 50,086 53,856 48,564 37,933
Two Years Later 37,118 49,327 53,715 56,626 50,520 50,474 50,006 42,989
Three Years Later 37,932 49,051 53,022 55,147 51,854 46,624 46,710
Four Years Later 38,424 49,436 52,644 57,720 49,739 44,823
Five Years Later 38,580 49,297 54,030 56,824 48,592
Six Years Later 38,584 50,701 53,697 55,770
Seven Years Later 39,965 50,515 53,683
Eight Years Later 39,861 50,521
Nine Years Later 39,998
Net cumulative (deficiency)
or redundancy (13,753) (12,670) 2,741 4,348 11,632 11,980 5,832 10,498 8,192
Expressed as a percentage of
unpaid losses and LAE (52.4%) (33.5%) 4.9% 7.2% 19.3% 21.1% 11.1% 19.6% 17.8%
</TABLE>
Net reserves for Superior increased substantially through 1990 before
decreasing in 1992. Such changes were due to changes in premium volume and
reduction of reserve redundancies. The decrease in 1995 reflects the Company's
curtailment of marketing efforts and writings in Illinois, Mississippi,
Tennessee, Texas and Washington resulting from more restrictive underwriting
criteria, inadequately priced business in these states and other unfavorable
marketing conditions. Significant deficiencies developed in reserves established
as of December 31 of each of 1986 through 1988 which were substantially offset
by reserve additions in 1989 due to changes in reserve methodology. With respect
to reserves established as of December 31, 1991 and 1992, Superior developed
significant redundancies due to conservative levels of case basis and IBNR
Reserves. Beginning in 1993, Superior began to adjust its reserving methodology
to reduce its redundancies and to take steps to close older claim files which
still carried redundant reserves.
The Company employs an independent actuary to annually evaluate and
certify the adequacy of its Loss and LAE reserves.
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<PAGE>
Investments
Insurance company investments must comply with applicable laws and
regulations which prescribe the kind, quality and concentration of investments.
In general, these laws and regulations permit investments, within specified
limits and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common securities, real estate
mortgages and real estate. The Company's investment policies are determined by
the Company's Board of Directors and are reviewed on a regular basis. The
Company's investment strategy is to maximize the after-tax yield of the
portfolio while emphasizing the stability and preservation of the Company's
capital base. Further, the portfolio is invested in types of securities and in
an aggregate duration which reflect the nature of the Company's liabilities and
expected liquidity needs, and the Company's fixed maturity and common equity
investments are substantially all in public companies. The Company's investments
in real estate and mortgage loans represent 1.4% of the Company's aggregate
investments. The investment portfolios of the Company are managed by third-party
professional administrators, in accordance with pre-established investment
policy guidelines established by the Company. The investment portfolios of the
Company at June 30, 1997 consisted of the following:
(in thousands)
Estimated
Type of Investment Amortized Cost Market Value
- ------------------ -------------- ------------
Fixed maturities:
United States Treasury securities
and obligations of United States
government corporations and agencies $51,447 $51,382
Obligations of states and political
subdivisions 6,308 6,343
Corporate securities 85,773 86,180
------ ------
Total Fixed Maturities 143,528 143,905
Equity Securities:
Preferred stocks --- ---
Common stocks 25,792 32,031
Short-term investments (1) 11,742 11,742
Real estate 457 457
Mortgage loans (2) 2,290 2,290
Other loans 75 75
-- --
Total Investments $183,884 $190,500
======= =======
- ---------------
(1) Due to the nature of crop insurance, the Company must maintain
short-term investments to fund amounts due under the MPCI program.
(2) Mortgage loans represent one commercial real estate loan for $3 million
due in 2001 with monthly principal and interest (8.0%) payments. All
payments on the loan were current as of June 30, 1997.
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The following table sets forth, as of December 31, 1995 and 1996 and
June 30, 1997 the composition of the fixed maturity securities portfolio of the
Company by time to maturity.
(in thousands) 1995 1996 June 30, 1997
----------------- ------------------ -------------------
Percent Percent Percent
Total Total Total
Market Market Market Market Market Market
Time To Maturity Value Value Value Value Value Value
- ---------------- ----- ----- ----- ----- ----- -----
1 year or less $4,610 35.6% $ 6,423 5.0% $15,250 10.6%
More than 1 year
through 5 years 5,051 39.1% 71,086 55.7% 77,867 54.1%
More than 5 years
through 10 years 3,270 25.3% 43,404 34.0% 43,013 29.9%
More than 10 years --- --- 6,768 5.3% 7,775 5.4%
------ ----- ----- ---- ----- ----
Total $12,931 100.0% $127,681 100.0% $143,905 100.0%
====== ====== ======= ====== ======= =====
The following table sets forth, as of December 31, 1995 and 1996 and
June 30, 1997 the ratings assigned to the fixed maturity securities of the
Company.
(in thousands) 1995 1996 June 30, 1997
------------------- -------------------- ---------------
Percent Percent Percent
Total Total Total
Market Market Market Market Market Market
Rating (1) Value Value Value Value Value Value
- ---------- ----- ----- ----- ----- ----- -----
Aaa or AAA $7,753 60.0% $50,444 39.5% $53,491 37.2%
Aa or AA 680 5.2% 2,976 2.3% 3,918 2.7%
A 257 2.0% 50,365 39.4% 68,216 47.4%
Baa or BBB 100 0.8% 11,671 9.1% 14,829 10.3%
Ba or BB --- --- 2,840 2.3% 2,947 2.0%
Other below
investment grade --- --- 2,091 1.6% --- ---
Not rated (2) 4,141 32.0% 7,294 5.8% 504 0.4%
----- ----- ----- ---- --- ----
Total $12,931 100.0% $127,681 100.0% $143,905 100.0%
====== ====== ======= ====== ======= ======
- ---------------
(1) Ratings are assigned by Moody's Investors Service, Inc., and when not
available, are based on ratings assigned by Standard & Poor's
Corporation.
(2) These securities were not rated by the rating agencies. However, these
securities are designated as Category 1 securities by the NAIC, which
is the equivalent rating of "A" or better.
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The investment results of the Company for the periods indicated are set
forth below:
<TABLE>
Six Months Ended
(in thousands) Years Ended December 31, June 30,
----------------------------------------------- -----------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
Net investment income (1) $1,241 $1,173 $6,733 $1,533 $5,276
Average investment portfolio (2) $20,628 $22,653 $153,565 $146,757 $174,596
Pre-tax return on average investment
portfolio 6.0% 5.2% 5.9% 4.4% 6.0%
Net realized gains (losses) $(159) $(344) $(1,015) $228 $1,684
</TABLE>
- ---------------
(1) Includes dividend income received in respect of holdings of common
stock.
(2) Average investment portfolio represents the average (based on amortized
cost) of the beginning and ending investment portfolio. For 1996, the
average investment portfolio was adjusted for the effect of the
Acquisition.
Ratings
A.M. Best has currently assigned a "B+" rating to Superior and a "B-"
rating to Pafco. Pafco's rating has been confirmed by A.M. Best at a "B-" rating
subsequent to the Acquisition. Superior's rating was reduced from "A-" to "B+"
as a result of the leverage of GGS Holdings resulting from indebtedness assumed
in connection with the Acquisition. IGF recently received an "NR-2" rating (a
"rating not assigned" category for companies that do not meet A.M. Best's
minimum size requirement) from A.M. Best.
A.M. Best's ratings are based upon a comprehensive review of a
company's financial performance, which is supplemented by certain data,
including responses to A.M. Best's questionnaires, phone calls and other
correspondence between A.M. Best analysts and company management, quarterly NAIC
filings, state insurance department examination reports, loss reserve reports,
annual reports, company business plans and other reports filed with state
insurance departments. A.M. Best undertakes a quantitative evaluation, based
upon profitability, leverage and liquidity, and a qualitative evaluation, based
upon the composition of a company's book of business or spread of risk, the
amount, appropriateness and soundness of reinsurance, the quality,
diversification and estimated market value of its assets, the adequacy of its
loss reserves and policyholders' surplus, the soundness of a company's capital
structure, the extent of a company's market presence and the experience and
competence of its management. A.M. Best's ratings represent an independent
opinion of a company's financial strength and ability to meet its obligations to
policyholders. A.M. Best's ratings are not a measure of protection afforded
investors. "B+" and "B-" ratings are A.M. Best's sixth and eighth highest rating
classifications, respectively, out of 15 ratings. A "B+" rating is awarded to
insurers which, in A.M. Best's opinion, "have demonstrated very good overall
performance when compared to the standards established by the A.M. Best Company"
and "have a good ability to meet their obligations to policyholders over a long
period of time." A "B-" rating is awarded to insurers which, in A.M. Best's
opinion, "have demonstrated adequate overall performance when compared to the
standards established by the A.M. Best Company" and "have an adequate ability to
meet their obligations to policyholders, but their financial strength is
vulnerable to unfavorable changes in underwriting or economic conditions." There
can be no assurance that such ratings or changes therein will not in the future
adversely affect the Company's competitive position.
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<PAGE>
Recent Acquisitions
On January 31, 1996, Goran, the Company, Fortis, Inc. and its
wholly-owned subsidiary, Interfinancial, Inc., a holding company for Superior,
entered into a Stock Purchase Agreement (the "Superior Purchase Agreement")
pursuant to which the Company agreed to purchase Superior from Interfinancial,
Inc. for a purchase price of approximately $66.6 million. Simultaneously with
the execution of the Superior Purchase Agreement, Goran, the Company, GGS
Holdings and the GS Funds, a Delaware limited partnership, entered into an
agreement (the "GGS Agreement") to capitalize GGS Holdings and to cause GGS
Holdings to issue its capital stock to the Company and to the GS Funds, so as to
give the Company a 52% ownership interest and the GS Funds a 48% ownership
interest (the "Formation Transaction"). Pursuant to the GGS Agreement (a) the
Company contributed to GGS Holdings (i) all the outstanding common stock of
Pafco, with a book value of $16.9 million, (ii) its right to acquire Superior
pursuant to the Superior Purchase Agreement and (iii) certain fixed assets,
including office furniture and equipment, having a value of approximately
$350,000 and (b) the GS Funds contributed to GGS Holdings $21.2 million in cash.
The Formation Transaction and the Acquisition were completed on April 30, 1996.
On August 12, 1997, the Company acquired the remaining 48% interest in GGS
Holdings that had been owned by the GS funds for $61 million with a portion of
the proceeds from the sale of the Preferred Securities.
Regulation
General
The Company's insurance businesses are subject to comprehensive,
detailed regulation throughout the United States, under statutes which delegate
regulatory, supervisory and administrative powers to state insurance
commissioners. The primary purpose of such regulations and supervision is the
protection of policyholders and claimants rather than stockholders or other
investors. Depending on whether the insurance company is domiciled in the state
and whether it is an admitted or non-admitted insurer, such authority may extend
to such things as (i) periodic reporting of the insurer's financial condition,
(ii) periodic financial examination, (iii) approval of rates and policy
forms,(iv) loss reserve adequacy, (v) insurer solvency, (vi) the licensing of
insurers and their agents, (vii) restrictions on the payment of dividends and
other distributions, (viii) approval of changes in control and (ix) the type and
amount of permitted investments.
Pafco, IGF and Superior are subject to triennial examinations by state
insurance regulators. Such examinations were last conducted for Pafco as of
December 31, 1996, (covering the period to that date from June 30, 1992), for
IGF as of December 31, 1996, (covering the period to that date from June 30,
1992)and for Superior as of December 31, 1993 (covering the period to that date
from January 1, 1991). The two subsidiaries of Superior, Superior American
Insurance Company and Superior Guaranty Insurance Company, had examinations
conducted as of October 31, 1996 (covering the period to that date from the
subsidiaries' inception on December 9, 1994). Superior has not been notified of
the date of its next examination. The Company does not expect any material
findings from the examinations of Pafco, IGF or Superior and the Superior
subsidiaries.
Insurance Holding Company Regulation
The Company also is subject to laws governing insurance holding
companies in Florida and Indiana, where the insurers are domiciled. These laws,
among other things, (i) require the Company to file periodic information with
state regulatory authorities including information concerning its capital
structure, ownership, financial condition and general business operations, (ii)
regulate certain transactions between the Company, its affiliates and IGF, Pafco
and Superior (the "Insurers"), including the amount of dividends and other
distributions and the terms of surplus note and (iii) restrict the ability of
any one person to acquire certain levels of the Company's voting securities
without prior regulatory approval.
Any purchaser of 10% or more of the outstanding shares of Common Stock
of the Company would be presumed to have acquired control of Pafco and IGF
unless the Indiana Commissioner, upon application, has determined
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<PAGE>
otherwise. In addition, any purchaser of 5% or more of the outstanding shares of
Common Stock of the Company will be presumed to have acquired control of
Superior unless the Florida Commissioner, upon application, has determined
otherwise.
Indiana law defines as "extraordinary" any dividend or distribution
which, together with all other dividends and distributions to shareholders
within the preceding twelve months, exceeds the greater of: (i) 10% of statutory
surplus as regards policyholders as of the end of the preceding year or (ii) the
prior year's net income. Dividends which are not "extraordinary" may be paid ten
days after the Indiana Department receives notice of their declaration.
"Extraordinary" dividends and distributions may not be paid without prior
approval of the Indiana Commissioner or until the Indiana Commissioner has been
given thirty days prior notice and has not disapproved within that period. The
Indiana Department must receive notice of all dividends, whether "extraordinary"
or not, within five business days after they are declared. Notwithstanding the
foregoing limit, a domestic insurer may not declare or pay a dividend of funds
other than earned surplus without the prior approval of the Indiana Department.
"Earned surplus" is defined as the amount of unassigned funds set forth in the
insurer's most recent annual statement, less surplus attributable to unrealized
capital gains or reevaluation of assets. As of December 31 1996, IGF and Pafco
had earned surplus of $29,412,000 and $18,112,000, respectively. Further, no
Indiana domiciled insurer may make payments in the form of dividends or
otherwise to shareholders as such unless it possesses assets in the amount of
such payment in excess of the sum of its liabilities and the aggregate amount of
the par value of all shares of its capital stock; provided, that in no instance
shall such dividend reduce the total of (i) gross paid-in and contributed
surplus, plus (ii) special surplus funds, plus (iii) unassigned funds, minus
(iv) treasury stock at cost, below an amount equal to 50% of the aggregate
amount of the par value of all shares of the insurer's capital stock.
Under Florida law, a domestic insurer may not pay any dividend or
distribute cash or other property to its stockholders except out of that part of
its available and accumulated surplus funds which is derived from realized net
operating profits on its business and net realized capital gains. A Florida
domestic insurer may not make dividend payments or distributions to stockholders
without prior approval of the Florida Department if the dividend or distribution
would exceed the larger of (i) the lesser of (a) 10% of surplus or (b) net
income, not including realized capital gains, plus a two-year carryforward, (ii)
10% of surplus with dividends payable constrained to unassigned funds minus 25%
of unrealized capital gains or (iii) the lesser of (a) 10% of surplus or (b) net
investment income plus a three-year carryforward with dividends payable
constrained to unassigned funds minus 25% of unrealized capital gains.
Alternatively, a Florida domestic insurer may pay a dividend or distribution
without the prior written approval of the Florida Department if the dividend is
equal to or less than the greater of (i) 10% of the insurer's surplus as regards
policyholders derived from realized net operating profits on its business and
net realized capital gains or (ii) the insurer's entire net operating profits
and realized net capital gains derived during the immediately preceding calendar
year; (2) the insurer will have policyholder surplus equal to or exceeding 115%
of the minimum required statutory surplus after the dividend or distribution,
(3) the insurer files a notice of the dividend or distribution with the
department at least ten business days prior to the dividend payment or
distribution and (4) the notice includes a certification by an officer of the
insurer attesting that, after the payment of the dividend or distribution, the
insurer will have at least 115% of required statutory surplus as to
policyholders. Except as provided above, a Florida domiciled insurer may only
pay a dividend or make a distribution (i) subject to prior approval by the
Florida Department or (ii) thirty days after the Florida Department has received
notice of such dividend or distribution and has not disapproved it within such
time. In the consent order approving the Acquisition, the Florida Department has
prohibited Superior from paying any dividends (whether extraordinary or not) for
four years without the prior written approval of the Florida Department.
Under these laws, the maximum aggregate amounts of dividends permitted
to be paid to the Company in 1997 by IGF and Pafco without prior regulatory
approval are $12,122,000 and $561,000, respectively, none of which have been
paid. Although the Company believes that amounts required for it to meet its
financial and operating obligations will be available, there can be no assurance
in this regard. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company -- Liquidity and Capital Resources."
Further, there can be no assurance that, if requested, the Indiana Department
will approve any request for extraordinary dividends from Pafco or IGF or that
the Florida Department will allow any dividends to be paid by Superior during
the four year period described above.
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<PAGE>
The maximum dividends permitted by state law are not necessarily
indicative of an insurer's actual ability to pay dividends or other
distributions to a parent company, which also may be constrained by business and
regulatory considerations, such as the impact of dividends on surplus, which
could affect an insurer's competitive position, the amount of premiums that can
be written and the ability to pay future dividends. Further, state insurance
laws and regulations require that the statutory surplus of an insurance company
following any dividend or distribution by such company be reasonable in relation
to its outstanding liabilities and adequate for its financial needs.
While the non-insurance company subsidiaries are not subject directly
to the dividend and other distribution limitations, insurance holding company
regulations govern the amount which a subsidiary within the holding company
system may charge any of the Insurers for services (e.g., management fees and
commissions). These regulations may affect the amount of management fees which
may be paid by Pafco and Superior to GGS Management. The management agreement
between the Company and Pafco has been assigned to GGS Management, Inc. ("GGS
Management") and provides for an annual management fee equal to 15% of gross
premiums. A similar management agreement with a management fee of 17% of gross
premiums has been entered into between GGS Management and Superior. Employees of
the Company relating to the nonstandard automobile insurance business and all
Superior employees became employees of GGS Management effective April 30, 1996.
In the consent order approving the Acquisition, the Florida Department has
reserved, for three years, the right to reevaluate the reasonableness of fees
provided for in the Superior management agreement at the end of each calendar
year and to require Superior to make adjustments in the management fees based on
the Florida Department's consideration of the performance and operating
percentages of Superior and other pertinent data. There can be no assurance that
either the Indiana Department or the Florida Department will not in the future
require a reduction in these management fees.
Federal Regulation
The Company's MPCI program is federally regulated and supported by the
federal government by means of premium subsidies to farmers, expense
reimbursement and federal reinsurance pools for private insurers. Consequently,
the MPCI program is subject to oversight by the legislative and executive
branches of the federal government, including the FCIC. The MPCI program
regulations generally require compliance with federal guidelines with respect to
underwriting, rating and claims administration. The Company is required to
perform continuous internal audit procedures and is subject to audit by several
federal government agencies. No material compliance issues were noted during
IGF's most recent FCIC compliance review.
The MPCI program has historically been subject to change by the federal
government at least annually since its establishment in 1980, some of which
changes have been significant. The most recent significant changes to the MPCI
program came as a result of the passage by Congress of the 1994 Reform Act and
the 1996 Reform Act.
Certain provisions of the 1994 Reform Act, when implemented by the
FCIC, may increase competition among private insurers in the pricing of Buy-up
Coverage. The 1994 Reform Act authorizes the FCIC to implement regulations
permitting insurance companies to pass on to farmers in the form of reduced
premiums certain cost efficiencies related to any excess expense reimbursement
over the insurer's actual cost to administer the program, which could result in
increased price competition. To date, the FCIC has not enacted regulations
implementing these provisions but is currently collecting information from the
private sector regarding how to implement these provisions.
The 1994 Reform Act required farmers for the first time to purchase at
least CAT Coverage in order to be eligible for other federally sponsored farm
benefits, including but not limited to low interest loans and crop price
supports. The 1994 Reform Act also authorized for the first time the marketing
and selling of CAT Coverage by the local USDA offices. Partly as a result of the
increase in the size of the MPCI market resulting from the 1994 Reform Act, the
Company's MPCI Premium increased to $53.4 million in 1995 from $44.3 million in
1994. However, the 1996 Reform Act, signed into law by President Clinton in
April 1996, eliminates the linkage between CAT Coverage and qualification for
certain federal farm program benefits and also limits the role of the USDA
offices in the delivery of MPCI coverage. In accordance with the 1996 Reform
Act, the USDA announced in July 1996 the following 14 states where CAT Coverage
will no longer be available through USDA offices but rather would solely be
available through
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<PAGE>
private agencies: Arizona, Colorado, Illinois, Indiana, Iowa, Kansas, Minnesota,
Montana, Nebraska, North Carolina, North Dakota, South Dakota, Washington and
Wyoming. The limitation of the USDA's role in the delivery system for MPCI
should provide the Company with the opportunity to realize increased revenues
from the distribution and servicing of its MPCI product. The Company has not
experienced any material negative impact in 1996 from the delinkage mandated by
the 1996 Reform Act. In addition, through June 30, 1996, the FCIC transferred to
the Company approximately 8,900 insureds for CAT Coverage who previously
purchased such coverage from USDA field offices. The Company believes that any
future potential negative impact of the delinkage mandated by the 1996 Reform
Act will be mitigated by, among other factors, the likelihood that farmers will
continue to purchase MPCI to provide basic protection against natural disasters
since ad hoc federal disaster relief programs have been reduced or eliminated.
In addition, the Company believes that (i) lending institutions will likely
continue to require this coverage as a condition to crop lending and (ii) many
of the farmers who entered the MPCI program as a result of the 1994 Reform Act
have come to appreciate the reasonable price of the protection afforded by CAT
Coverage and will remain with the program regardless of delinkage. There can,
however, be no assurance as to the ultimate effect which the 1996 Reform Act may
have on the business or operations of the Company.
The crop insurance industry has recently completed negotiation of the
1998 Standard Reinsurance Agreement ("1998 SRA") with the FCIC, with the 1998
SRA providing for a 27% MPCI Expense Reimbursement and no change to the CAT
Coverage program from prior years.
Underwriting and Marketing Restrictions
During the past several years, various regulatory and legislative
bodies have adopted or proposed new laws or regulations to deal with the
cyclical nature of the insurance industry, catastrophic events and insurance
capacity and pricing. These regulations include (i) the creation of "market
assistance plans" under which insurers are induced to provide certain coverages,
(ii) restrictions on the ability of insurers to rescind or otherwise cancel
certain policies in mid-term, (iii) advance notice requirements or limitations
imposed for certain policy non-renewals and (iv) limitations upon or decreases
in rates permitted to be charged.
Insurance Regulatory Information System
The NAIC Insurance Regulatory Information System ("IRIS") was developed
primarily to assist state insurance departments in executing their statutory
mandate to oversee the financial condition of insurance companies. Insurance
companies submit data on an annual basis to the NAIC, which analyzes the data
using ratios concerning various categories of financial data. IRIS ratios
consist of twelve ratios with defined acceptable ranges. They are used as an
initial screening process for identifying companies that may be in need of
special attention. Companies that have several ratios that fall outside of the
acceptable range are selected for closer review by the NAIC. If the NAIC
determines that more attention may be warranted, one of five priority
designations is assigned and the insurance department of the state of domicile
is then responsible for follow-up action.
During 1996 Pafco had a net premiums to surplus ratio of 3.03 to 1
which was slightly in excess of the high end range of 3.0 to 1. The excess was
not material and Pafco has the ability to Cede business under its current quota
share arrangement to maintain compliance with this ratio test. Pafco's change in
net writings was 61% compared to 33% at the high end of the range. This result
was expected given growth in gross premiums and elimination of quota share
Reinsurance. Pafco also had positive surplus growth of 64% outside the high end
of the range at 50%. Pafco planned for higher premium volume given the more
profitable results than in prior years. During 1996, Pafco's investment yield as
calculated under the IRIS tests was 3.8% which was below the low end of the
range at 4.5%. However, this IRIS test is a simple average of beginning and
end-of-year investments. Pafco's value fell below the range due to the
following: (i) inclusion of investment in IGF prior to the Transfer during the
first four months of the year when no investment income was received, (ii)
growth in the portfolio in the latter part of the year not taken into account by
the IRIS test, (iii) change during the course of the year to reduce ratio of
equities to total investments in favor of fixed income securities, (iv)
contribution to surplus of $3.7 million at the end of 1996 included in the IRIS
test and (v) inclusion of the home office building in the investment base. If a
weighted average was calculated using monthly
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<PAGE>
balances and excluding the IGF investment and real estate was excluded from the
calculation, Pafco's return would have been 5.7%. Based on current investment
levels and mix it is expected that this test will be met in 1997; however, Pafco
is currently a Priority 3 company based on its 1996 IRIS tests. During 1996,
Pafco's ratio of reserve deficiency to surplus was 62% which exceeds the upper
range of 25%. This IRIS test calculates the average of claims liability to
premiums for the preceding two years and compares the resultant percentage to
the current year's percentage with a corresponding analysis to surplus. During
1994 and 1995, Pafco's claims liability to premiums ratio was approximately 55%
and decreased to approximately 35% in 1996, resulting in the unusual IRIS
result. This situation was a result of commercial claims liabilities in 1994 and
1995 that have now been Ceded to an affiliate. Thus, net claims liability at
December 31, 1996 is entirely for nonstandard automobile insurance. The reserves
for the commercial liability business were at a much higher ratio of premiums
and are paid at a much slower rate than nonstandard automobile claims. Thus,
although premiums grew in 1996, the increase in nonstandard automobile claims
liability was offset by ceded commercial claims. As this IRIS test uses a two
year average of claims liabilities to premiums, it is likely that Pafco may
exceed the normal ratio in 1997. It should be noted that Pafco did not have
unusual IRIS values for the one and two year reserve development to surplus
tests. Pafco is expected to fail its reserve development IRIS test ratio for
1997 and 1998 due to Pafco's additions to its reserves which is discussed more
fully in "Recent Developments."
During 1996 IGF had unusual values for three IRIS tests. IGF's surplus
increased by 237% which exceeded the high end of the range of 50%. However, this
is a very positive development due to growth in profits and the capital infusion
from the proceeds of the Initial Public Offering. IGF continued to have unusual
values in the liabilities to liquid assets and agents balances to surplus tests.
IGF generally has an unusual value in these tests due to the Reinsurance program
mandated by the FCIC for the distribution of the MPCI program and the fact that
agents' balances at December 31 are usually not settled until late February.
During 1996 Superior had a ratio of Net Premiums Written to surplus of
3.07 to 1 compared to the IRIS test upper limit of 3.0 to 1. During 1996,
Superior's net premium writings increased by 116% which exceeded the upper limit
of the IRIS range of 33%. Superior had a reserve deficiency to surplus ratio of
29% which was in excess of the upper IRIS limit of 25%. All these matters were a
function of the strong growth of Superior. Such results may continue in the
future if growth continues. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for further discussion on impact
of premium writings to surplus ratio.
Risk-Based Capital Requirements
In order to enhance the regulation of insurer solvency, the NAIC has
adopted a formula and model law to implement risk-based capital ("RBC")
requirements for property and casualty insurance companies designed to assess
minimum capital requirements and to raise the level of protection that statutory
surplus provides for policyholder obligations. Indiana and Florida have
substantially adopted the NAIC model law, and Indiana directly, and Florida
indirectly, have adopted the NAIC model formula. The RBC formula for property
and casualty insurance companies measures four major areas of risk facing
property and casualty insurers: (i) underwriting, which encompasses the risk of
adverse loss developments and inadequate pricing, (ii) declines in asset values
arising from credit risk, (iii) declines in asset values arising from investment
risks and (iv) off-balance sheet risk arising from adverse experience from
non-controlled assets, guarantees for affiliates, contingent liabilities and
reserve and premium growth. Pursuant to the model law, insurers having less
statutory surplus than that required by the RBC calculation will be subject to
varying degrees of regulatory action, depending on the level of capital
inadequacy.
The RBC model law provides for four levels of regulatory action. The
extent of regulatory intervention and action increases as the level of surplus
to RBC falls. The first level, the Company Action Level (as defined by the
NAIC), requires an insurer to submit a plan of corrective actions to the
regulator if surplus falls below 200% of the RBC amount. The Regulatory Action
Level (as defined by the NAIC) requires an insurer to submit a plan containing
corrective actions and requires the relevant insurance commissioner to perform
an examination or other analysis and issue a corrective order if surplus falls
below 150% of the RBC amount. The Authorized Control Level (as defined by the
NAIC) gives the relevant insurance commissioner the option either to take the
aforementioned actions or to rehabilitate or liquidate the insurer if surplus
falls below 100% of the RBC amount. The fourth action level is the
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Mandatory Control Level (as defined by the NAIC) which requires the relevant
insurance commissioner to rehabilitate or liquidate the insurer if surplus falls
below 70% of the RBC amount. Based on the foregoing formulae, as of December 31,
1996, the RBC ratios of the Insurers were in excess of the Company Action Level,
the first trigger level that would require regulatory action.
Guaranty Funds; Residual Markets
The Insurers also may be required under the solvency or guaranty laws
of most states in which they do business to pay assessments (up to certain
prescribed limits) to fund policyholder losses or liabilities of insolvent or
rehabilitated insurance companies. These assessments may be deferred or forgiven
under most guaranty laws if they would threaten an insurer's financial strength
and, in certain instances, may be offset against future premium taxes. Some
state laws and regulations further require participation by the Insurers in
pools or funds to provide some types of insurance coverages which they would not
ordinarily accept. The Company recognizes its obligations for guaranty fund
assessments when it receives notice that an amount is payable to the fund. The
ultimate amount of these assessments may differ from that which has already been
assessed.
It is not possible to predict the future impact of changing state and
federal regulation on the Company's operations and there can be no assurance
that laws and regulations enacted in the future will not be more restrictive
than existing laws.
Properties
The headquarters for the Company, GGS Holdings and Pafco are located at
4720 Kingsway Drive, Indianapolis, Indiana. The building is an 80,000 square
foot multilevel structure approximately 50% of which is utilized by the Company.
The remaining space is leased to third-parties at a price of approximately $10
per square foot.
Pafco also owns an investment property located at 2105 North Meridian,
Indianapolis, Indiana. The property is a 21,700 square foot, multilevel building
leased out entirely to third parties.
Superior's operations are conducted at leased facilities located in
Atlanta, Georgia; Tampa, Florida; and Orange, California. Under a lease term
which extends through February, 1998, Superior leases office space at 280
Interstate North Circle, N.W., Suite 500, Atlanta, Georgia. Superior occupies
43,448 square feet at this location and subleases an additional 3,303 square
feet to third-party tenants. Superior also has an office located at 3030 W.
Rocky Pointe Drive, Suite 770, Tampa, Florida consisting of 18,477 square feet
of space leased for a term extending through February, 2000. In addition,
Superior occupies an office at 1745 West Orangewood, Orange, California
consisting of 3,264 square feet under a lease extending through May 1997.
IGF owns a 17,500 square foot office building located at 2882 106th
Street, Des Moines, Iowa which serves as its corporate headquarters. The
building is fully occupied by IGF but is currently for sale. IGF also owns
certain improved commercial property which is adjacent to its corporate
headquarters.
IGF has entered into a purchase agreement to acquire an office building
in Des Moines, Iowa to be used as its crop insurance division home office. The
purchase price was $2.6 million of which $2.4 million was escrowed on February
1, 1997. The terms include a floating closing date whereby the transaction will
close on the earlier of February 1, 1998 or 30 days after the closing of the
sale of the Company's currently occupied home office building, also located in
Des Moines. The purchase of the new building is not contingent on the sale of
the current building.
Employees
At December 31, 1996 the Company and its subsidiaries employed
approximately 1,000 full and part-time employees. The Company believes that
relations with its employees are excellent.
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Legal Proceedings
IGF is the administrator of a run-off book of business. The FCIC has
requested that IGF take responsibility for the claims liabilities of these
policies under its administration. IGF has requested reimbursement of certain
expenses from the FCIC with respect to this run-off activity. IGF instituted
litigation against the FCIC on March 23, 1995 in the United States District
Court for the Southern District of Iowa seeking $4.3 million as reimbursement
for these expenses. The FCIC has counterclaimed for approximately $1.2 million
in claims payments for which FCIC contends IGF is responsible as successor to
the run-off book of business. While the outcome of this lawsuit cannot be
predicted with certainty, the Company believes that the final resolution of this
lawsuit will not have a material adverse effect on the financial condition of
the Company.
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the Preferred Securities, the Company
and the Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and the Trust agreed to file and to
use their reasonable efforts to cause to become effective with the Commission a
registration statement with respect to the exchange of the Preferred Securities
for capital securities with terms identical in all material respects to the
terms of the Preferred Securities. A copy of the Registration Rights Agreement
has been filed as an Exhibit to the Registration Statement of which this
Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations
of the Company and the Trust under the Registration Rights Agreement. The form
and terms of the Exchange Preferred Securities are the same as the form and
terms of the Preferred Securities except that the Exchange Preferred Securities
have been registered under the Securities Act and will not be subject to the
$100,000 minimum Liquidation Amount transfer restriction and certain other
restrictions on transfer applicable to the Preferred Securities and will not
provide for any increase in the Distribution rate thereon. In that regard, the
Preferred Securities provide, among other things, that, if a registration
statement relating to the Exchange Offer has not been filed by September 30,
1997 and declared effective by February 9, 1998, the Distribution rate borne by
the Preferred Securities commencing on September 16, 1997 will increase by 0.25%
per annum until the Exchange Offer is consummated. Upon consummation of the
Exchange Offer, holders of Preferred Securities will not be entitled to any
increase in the Distribution rate thereon or any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors -- Consequences of a Failure to Exchange Preferred Securities."
The Exchange Offer is not being made to, nor will the Trust accept
tenders for exchange from, holders of Preferred Securities in any jurisdiction
in which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Preferred Securities
are registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Preferred Securities are held of record by The Depository Trust Company ("DTC")
who desires to deliver such Preferred Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof, the Company Guarantee for the Exchange
Guarantee and the Old Senior Subordinated Notes, in an amount corresponding to
the Preferred Securities accepted for exchange, for a like aggregate principal
amount of the Exchange Notes. The Exchange Guarantee, Exchange Notes and the
Exchange Preferred Securities have been registered under the Securities Act.
Terms of the Exchange Offer
The Trust hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $135,000,000 aggregate Liquidation Amount of Exchange Preferred
Securities for a like aggregate Liquidation Amount of Preferred Securities
properly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures described below. The Trust will issue promptly
after the Expiration Date, an aggregate Liquidation Amount of up to $135,000,000
of Exchange Preferred Securities in exchange for a like principal amount of
outstanding Preferred Securities tendered and accepted in connection with the
Exchange Offer. Holders may tender their Preferred Securities in whole or in
part in a Liquidation Amount of not less than $100,000 (100 Preferred
Securities) or any integral multiple of $1,000 Liquidation amount (one Preferred
Security) in excess thereof.
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The Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Preferred Securities being tendered. As of the date of this
Prospectus, $135,000,000 aggregate Liquidation Amount of the Preferred
Securities is outstanding.
Holders of Preferred Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Preferred Securities
which are not tendered for or are tendered but not accepted in connection with
the Exchange Offer will remain outstanding and be entitled to the benefits of
the Declaration, but will not be entitled to any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors -- Consequences of a Failure to Exchange Preferred Securities."
If any tendered Preferred Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Preferred Securities
will be returned, without expense, to the tendering holders thereof promptly
after the Expiration Date.
Holders who tender Preferred Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Preferred Securities in connection with the Exchange Offer. The
Company will pay all charges and expenses, other than certain applicable taxes
described below, in connection with the Exchange Offer. See " -- Fees and
Expenses."
NEITHER THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY
ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF PREFERRED
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR PREFERRED SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF PREFERRED
SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF PREFERRED SECURITIES TO
TENDER BASED ON SUCH HOLDERS' OWN FINANCIAL POSITION AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on
_____________, 1997 unless the Exchange Offer is extended by the Company or the
Trust (in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their
reasonable discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Preferred Securities for exchange, (ii)
to terminate the Exchange Offer (whether or not any Preferred Securities have
theretofore been accepted for exchange) if the Trust determines, in its
reasonable discretion, that any of the events or conditions referred to under "
- -- Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied and (iii) to extend the Expiration Date of the Exchange Offer and
retain all Preferred Securities tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Preferred Securities to withdraw
their tendered Preferred Securities as described under " -- Withdrawal Rights."
If the Exchange Offer is amended in a manner determined by the Company and the
Trust to constitute a material change, or if the Company and the Trust waive a
material condition of the Exchange Offer, the Company and the Trust will
promptly disclose such amendment or waiver by means of a prospectus supplement
that will be distributed to the holders of the Preferred Securities. If any
facts or events arise which constitute a fundamental change in the information
set forth herein or if any material changes or material additions are made to
the Plan of Distribution described herein, the Company and the Trust will file a
post-effective amendment to the Registration Statement setting forth the
applicable information and will distribute an amended prospectus to the holders
of the Preferred Securities. At the time that such prospectus supplement or
amended prospectus is first given to holders of Preferred Securities, the
Exchange Offer is scheduled to expire at any time earlier than the expiration of
a period ending on the tenth business day from, and including, the date that
such prospectus supplement or amended prospectus is first so given, then the
Exchange Offer will be extended until the expiration of such period of ten
business days.
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Any such delay in acceptance, extension, termination or amendment will
be followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company and the Trust may choose to make any public
announcement and subject to applicable law, the Company and the Trust shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
Acceptance for Exchange and Issuance of Exchange Preferred Securities
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, Exchange Preferred
Securities for Preferred Securities validly tendered and not withdrawn promptly
after the Expiration Date.
In all cases, delivery of Exchange Preferred Securities in exchange for
Preferred Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i)
Preferred Securities or a book-entry confirmation of a book-entry transfer of
Preferred Securities into the Exchange Agent's account at DTC, (ii) the Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a participant in the
book-entry transfer facility system, an Agent's Message and (iii) any other
documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Preferred Securities into the Exchange Agent's account at
DTC.
Subject to the terms and conditions of the Exchange Offer, the Trust
will be deemed to have accepted for exchange, and thereby exchanged, Preferred
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent of the Trust's acceptance of such
Preferred Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
Preferred Securities, Letters of Transmittal and related documents, and as agent
for tendering holders for the purpose of receiving Preferred Securities, Letters
of Transmittal and related documents and transmitting Exchange Preferred
Securities to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If, for any reason whatsoever, acceptance for
exchange or the exchange of any Preferred Securities tendered pursuant to the
Exchange Offer is delayed (whether before or after the Trust's acceptance for
exchange of Preferred Securities) or the Trust extends the Exchange Offer or is
unable to accept for exchange or exchange Preferred Securities tendered pursuant
to the Exchange Offer, then, without prejudice to the Trust's rights set forth
herein, the Exchange Agent may, nevertheless, on behalf of the Trust and subject
to Rule 14e-1(c) under the Exchange Act, retain tendered Preferred Securities
and such Preferred Securities may not be withdrawn except to the extent
tendering holders are entitled to withdrawal rights as described under " --
Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Preferred Securities
will warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Preferred Securities,
that the Trust will acquire good, marketable and unencumbered title to the
tendered Preferred Securities, free and clear of all liens, restrictions,
charges and encumbrances, and the Preferred Securities tendered for exchange are
not subject to any adverse claims or proxies. The holder also will warrant and
agree that it will, upon request, execute and deliver any additional documents
deemed by the Trust or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment and transfer of the Preferred Securities
tendered pursuant to the Exchange Offer.
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Procedures for Tendering Preferred Securities
Valid Tender
Except as set forth below, in order for Preferred Securities to be
validly tendered pursuant to the Exchange Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, or an Agent's Message in
case of book-entry delivery as described below, must be received by the Exchange
Agent at one of its addresses set forth under " -- Exchange Agent," and either
(i) tendered Preferred Securities must be received by the Exchange Agent, or
(ii) such Preferred Securities must be tendered pursuant to the procedures for
book-entry transfer set forth below and a book-entry confirmation must be
received by the Exchange Agent, in each case on or prior to the Expiration Date
or (iii) the guaranteed delivery procedures set forth below must be complied
with.
If less than all of the Preferred Securities are tendered, a tendering
holder should fill in the amount of Preferred Securities being tendered in the
appropriate box on the Letter of Transmittal. The entire amount of Preferred
Securities delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer
The Exchange Agent will establish an account with respect to the
Preferred Securities at DTC for purposes of the Exchange Offer within two
Business Days after the date of this Prospectus. Any financial institution that
is a participant in DTC's book-entry transfer facility system may make a
book-entry delivery of the Preferred Securities by causing DTC to transfer such
Preferred Securities into the Exchange Agent's account at DTC in accordance with
DTC's procedures for transfers. Except in the case of a participant in the
book-entry transfer facility system who transfers the Preferred Securities by an
Agent's Message, delivery of Preferred Securities effected through book-entry
transfer into the Exchange Agent's account at DTC requires that the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must in any
case be delivered to and received by the Exchange Agent at its address set forth
under " -- Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with. A Holder who is a
participant in the book-entry transfer facility system and transfers the
Preferred Securities by an Agent's Message need not transmit the Letter of
Transmittal to the Exchange Agent to consummate the exchange.
The term "Agent's Message" means a message transmitted through
electronic means by a book-entry transfer facility to and received by the
Exchange Agent and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgment from the participant tendering
the Preferred Securities that such participant has received and agrees to be
bound by the Letter of Transmittal and/or the Notice of Guaranteed Delivery (as
discussed below), where applicable.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees
Certificates for the Preferred Securities need not be endorsed and
signature guarantees on the Letter of Transmittal are unnecessary unless (a) a
certificate for the Preferred Securities is registered in a name other than that
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of the person surrendering the certificate or (b) such holder completes the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" in
the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Preferred Securities must be duly endorsed or accompanied by a properly
executed bond power, with the endorsement or signature on the bond power and on
the Letter of Transmittal guaranteed by a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution,"
including (as such terms are defined therein): (i) a bank, (ii) a broker,
dealer, municipal securities broker or dealer or government securities broker or
dealer, (iii) a credit union, (iv) a national securities exchange, registered
securities association or clearing agency, or (v) a savings association that is
a participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.
Guaranteed Delivery
If a holder desires to tender Preferred Securities pursuant to the
Exchange Offer and the certificates for such Preferred Securities are not
immediately available or time will not permit all required documents to reach
the Exchange Agent on or prior to the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, such Preferred
Securities may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible
Institution;
(b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying the Letter
of Transmittal, or, in the case of a participant in the book-entry
transfer facility system, an Agent's Message, is received by the
Exchange Agent, as provided below, on or prior to the Expiration Date;
and
(c) the certificates (or a book-entry confirmation)
representing all tendered Preferred Securities, in proper form for
transfer, together with a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), with any required signature
guarantees and any other documents required by the Letter of
Transmittal, or, in the case of a participant in the book-entry
transfer facility system, an Agent's Message, are received by the
Exchange Agent within three New York Stock Exchange trading days after
the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mailed to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of Exchange
Preferred Securities in exchange for Preferred Securities tendered and accepted
for exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Preferred Securities, or of a book-entry
confirmation with respect to such Preferred Securities, and a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), together with
any required signature guarantees and any other documents required by the Letter
of Transmittal, or, in the case of a participant in the book-entry transfer
facility system, an Agent's Message. Accordingly, the delivery of Exchange
Preferred Securities might not be made to all tendering holders at the same time
and will depend upon when Preferred Securities, book-entry confirmation with
respect to Preferred Securities and other required documents are received by the
Exchange Agent.
The Trust's acceptance for exchange of Preferred Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
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Determination of Validity
All questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tendered
Preferred Securities will be determined by the Company and the Trust, in their
sole discretion, whose determination shall be final and binding on all parties.
The Company and the Trust reserve the absolute right, in their sole and absolute
discretion, to reject any and all tenders determined by them not to be in proper
form or the acceptance of which, or exchange for, may, in the opinion of counsel
to the Company and the Trust, be unlawful. The Company and the Trust also
reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer as set forth under " -- Conditions to the
Exchange Offer" or any condition or irregularity in any tender of Preferred
Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
The interpretation by the Company and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Preferred
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Company, the
Trust, any affiliates or assigns of the Company or the Trust, the Exchange Agent
nor any other person shall be under any duty to give any notification of any
irregularities in tenders or incur any liability for failure to give any such
notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company
and the Trust, proper evidence satisfactory to the Company and the Trust, in
their sole discretion, of such person's authority to so act must be submitted.
A beneficial owner of Preferred Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
Resales of Exchange Preferred Securities
The Trust is making the Exchange Offer for the Exchange Preferred
Securities in reliance on the position of the Staff set forth in certain
interpretive letters addressed to third parties in other transactions. However,
neither the Company nor the Trust sought its own interpretive letter and there
can be no assurance that the Staff would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the Staff and subject to the two
immediately following sentences, the Company and the Trust believe that Exchange
Preferred Securities issued pursuant to the Exchange Offer in exchange for
Preferred Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Preferred Securities are acquired in
the ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such Exchange Preferred Securities. However, any holder of Preferred Securities
who is an "affiliate" of the Company or the Trust or who intends to participate
in the Exchange Offer for the purpose of distributing Exchange Preferred
Securities, or any broker-dealer who purchased Preferred Securities from the
Trust to resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the Staff
set forth in the above-mentioned interpretive letters, (b) will not be permitted
or entitled to tender such Preferred Securities in the Exchange Offer and (c)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Preferred
Securities unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, if any broker-dealer holds
Preferred Securities acquired for its own account as a result of market-making
or other trading activities and exchanges such Preferred Securities for Exchange
Preferred Securities, then such broker-dealer must
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deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such Exchange Preferred Securities.
Each holder of Preferred Securities who wishes to exchange Preferred
Securities for Exchange Preferred Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Company or the
Trust, (ii) any Exchange Preferred Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Preferred Securities and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Preferred Securities. In addition, the Company and the Trust
may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Company and the Trust (or
an agent thereof) in writing information as to the number of "beneficial owners"
(within the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom such
holder holds the Preferred Securities to be exchanged in the Exchange Offer.
Each broker-dealer that receives Exchange Preferred Securities for its own
account pursuant to the Exchange Offer must acknowledge that it acquired the
Exchange Preferred Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Preferred Securities. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the Staff in the interpretive
letters referred to above, the Company and the Trust believe that Participating
Broker-Dealers who acquired Preferred Securities for their own accounts as a
result of market-making activities or other trading activities may fulfill their
prospectus delivery requirements with respect to the Exchange Preferred
Securities received upon exchange of such Preferred Securities (other than
Preferred Securities which represent an unsold allotment from the original sale
of the Preferred Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Preferred Securities. Accordingly, this Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer during the period referred to below in connection
with resales of Exchange Preferred Securities received in exchange for Preferred
Securities where such Preferred Securities were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration Rights
Agreement, the Company and the Trust have agreed that this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such Exchange Preferred Securities
for a period ending 90-days after the Expiration Date (subject to extension
under certain limited circumstances described below) or, if earlier, when all
such Exchange Preferred Securities have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of Exchange Preferred Securities received in exchange for Preferred Securities
pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under " -- Exchange
Agent." Any Participating Broker-Dealer who is an "affiliate" of the Company or
the Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders
Preferred Securities pursuant to the Exchange Offer will be deemed to have
agreed, by execution of the Letter of Transmittal, that, upon receipt of notice
from the Company or the Trust of the occurrence of any event or the discovery of
any fact which makes any statement contained or incorporated by reference in
this Prospectus untrue in any material respect or which causes this Prospectus
to omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of Preferred Exchange Securities (or the
Exchange Guarantee or the Exchange Notes, as applicable) pursuant to this
Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has
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furnished copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company or the Trust has given notice that the sale of the
Exchange Preferred Securities (or the Exchange Guarantee or the Exchange Notes,
as applicable) may be resumed, as the case may be. If the Company or the Trust
give such notice to suspend the sale of the Exchange Preferred Securities (or
the Exchange Guarantee or the Senior Subordinated Notes, as applicable), it
shall extend the 90-day period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in connection with the resale
of Exchange Preferred Securities by the number of days during the period from
and including the date of the giving of such notice to and including the date
when Participating Broker- Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the Exchange Preferred
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of Exchange Preferred Securities (or the Exchange
Guarantee or the Exchange Notes, as applicable) may be resumed, as the case may
be.
Withdrawal Rights
Except as otherwise provided herein, tenders of Preferred Securities
may be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth under " -- Exchange Agent" on
or prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Preferred Securities to be withdrawn, the
aggregate principal amount of Preferred Securities to be withdrawn, and (if
certificates for such Preferred Securities have been tendered) the name of the
registered holder of the Preferred Securities as set forth on the Preferred
Securities, if different from that of the person who tendered such Preferred
Securities. If Preferred Securities have been delivered or otherwise identified
to the Exchange Agent, then prior to the physical release of such Preferred
Securities, the tendering holder must submit the serial number shown on the
particular Preferred Securities to be withdrawn and the signature on the notice
of withdrawal must be guaranteed by an Eligible Institution, except in the case
of Preferred Securities tendered for the account of an Eligible Institution. If
Preferred Securities have been tendered pursuant to the procedures for
book-entry transfer set forth in " -- Procedures for Tendering Preferred
Securities," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Preferred Securities, in
which case a notice of withdrawal will be effective if delivered to the Exchange
Agent by written or facsimile transmission. Withdrawals of tenders of Preferred
Securities may not be rescinded. Preferred Securities properly withdrawn will
not be deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under " -- Procedures for
Tendering Preferred Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, the Trust, any affiliates or assigns of the Company or the
Trust, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Preferred Securities
which have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
Distributions on Exchange Preferred Securities
Holders of Preferred Securities whose Preferred Securities are accepted
for exchange will not receive Distributions on such Preferred Securities and
will be deemed to have waived the right to receive any Distributions on such
Preferred Securities accumulated from and after August 12, 1997. Accordingly,
holders of Exchange Preferred Securities as of the record date for the payment
of Distributions on February 15, 1998 will be entitled to receive Distributions
accumulated from and after August 12, 1997.
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Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, or any
extension of the Exchange Offer, the Company and the Trust will not be required
to accept for exchange, or to exchange, any Preferred Securities for any
Exchange Preferred Securities, and, as described below, may terminate the
Exchange Offer (whether or not any Preferred Securities have theretofore been
accepted for exchange) if any of the following conditions have occurred or exist
or have not been satisfied:
(a) there shall occur a change in the current interpretation
by the Staff which permits the Exchange Preferred Securities issued
pursuant to the Exchange Offer in exchange for Preferred Securities to
be offered for resale, resold and otherwise transferred by holders
thereof (other than broker-dealers and any such holder which is an
"affiliate" of the Company or the Trust within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such
Exchange Preferred Securities are acquired in the ordinary course of
such holder's business and such holders have no arrangement or
understanding with any person to participate in the distribution of
such Exchange Preferred Securities; or
(b) any law, statute, rule or regulation shall have been
adopted or enacted which, in the judgment of the Company or the Trust,
would reasonably be expected to impair its ability to proceed with the
Exchange Offer; or
(c) a stop order shall have been issued by the Commission or
any state securities authority suspending the effectiveness of the
Registration Statement or proceedings shall have been initiated or, to
the knowledge of the Company or the Trust, threatened for that purpose
or any governmental approval has not been obtained, which approval the
Company or the Trust shall, in its reasonable discretion, deem
necessary for the consummation of the Exchange Offer as contemplated
hereby.
If the Company or the Trust determines in its reasonable discretion
that any of the foregoing events or conditions has occurred or exist or has not
been satisfied, it may, subject to applicable law, terminate the Exchange Offer
(whether or not any Preferred Securities have theretofore been accepted for
exchange) or may waive any such condition or otherwise amend the terms of the
Exchange Offer in any respect. If such waiver or amendment constitutes a
material change to the Exchange Offer, the Company or the Trust will promptly
disclose such waiver or amendment by means of a prospectus supplement that will
be distributed to the registered holders of the Preferred Securities. If such
waiver or amendment constitutes a fundamental change to the Exchange Offer, the
Company and the Trust will file a post-effective amendment to the Registration
Statement setting forth the applicable information and will distribute an
amended prospectus to the holders of the Preferred Securities. At the time that
such prospectus supplement or amended prospectus is first given to holders of
Preferred Securities, the Exchange Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such prospectus supplement or amended prospectus is
first so given, then the Exchange Offer will be extended until the expiration of
such period of ten business days.
Exchange Agent
Wilmington Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent, by registered or certified mail or by hand or overnight
delivery, as follows:
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Wilmington Trust Company
One Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Services
CONFIRM BY TELEPHONE:
(302) 651-8869
FACSIMILE TRANSMISSIONS:
(ELIGIBLE INSTITUTIONS ONLY)
(302) 651-1079
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
Fees and Expenses
The Company has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Company will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Preferred Securities, and in
handling or tendering for their customers.
Holders who tender their Preferred Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Preferred Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Preferred Securities
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Preferred Securities in connection with the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
Neither the Company nor the Trust will make any payment to brokers,
dealers or other nominees soliciting acceptance of the Exchange Offer.
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DESCRIPTION OF EXCHANGE PREFERRED SECURITIES
The following summary of certain material terms of the Exchange
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the
Declaration. Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Declaration. For the purposes of this section, as well
as the sections entitled, "Description of the Exchange Guarantee," "Description
of the Exchange Notes" and "Relationship Among the Exchange Preferred
Securities, the Declaration, the Exchange Notes and the Exchange Guarantee," the
"Company" refers to Symons International Group, Inc. exclusive of its
Subsidiaries or affiliates.
General
Pursuant to the terms of the Declaration, the Trust has issued the
Preferred Securities and the Common Securities and will issue the Exchange
Preferred Securities. The Exchange Preferred Securities will represent preferred
beneficial interests in the Trust and the holders of the Exchange Preferred
Securities and the Preferred Securities will be entitled to a preference over
the Common Securities in certain circumstances with respect to Distributions and
amounts payable on redemption of the Trust Securities or liquidation of the
Trust. See " -- Subordination of Common Securities." The Declaration has been
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). This summary of the material provisions of the Securities and
the Declaration does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Declaration, including the definitions therein of certain terms.
The Securities (including the Preferred Securities and the Exchange
Preferred Securities) are limited to $135,000,000 aggregate Liquidation Amount
at any one time outstanding. The Exchange Preferred Securities will rank pari
passu, and payments will be made thereon pro rata, with the Preferred Securities
and the Common Securities except as described under " -- Subordination of Common
Securities." Legal title to the Exchange Notes will be held by the Preferred
Trustee in trust for the benefit of the holders of the Securities and the Common
Securities. The Exchange Guarantee will be a guarantee on a subordinated basis
but will not guarantee payment of Distributions or amounts payable on redemption
of the Exchange Preferred Securities or on liquidation of the Trust when the
Trust does not have cash on hand legally available for such payments. See " --
Description of Exchange Guarantee."
Distributions
Distributions on the Exchange Preferred Securities will be fixed at a
rate per annum of 9 1/2% of the stated Liquidation Amount of $1,000 per Exchange
Preferred Security. The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve thirty-day months.
Distributions on the Exchange Preferred Securities will be cumulative,
will accrue from the date of initial issuance and will be payable semi-annually
in arrears on each February 15 and August 15, commencing February 15, 1998,
when, as and if the Trust has funds available for payment.
Distributions on the Exchange Preferred Securities must be paid
semi-annually on the dates payable to the extent that the Trust has funds
available for the payment of such Distributions. The Trust's funds available for
distribution to the holders of the Exchange Preferred Securities will be limited
to payments received from the Company on the Exchange Notes in which the Trust
has invested the proceeds from the issuance and sale of the Trust Securities.
See "Description of the Exchange Notes." The payment of Distributions, to the
extent of funds of the Trust available therefor, is guaranteed by the Company on
a limited basis, as set forth under "Description of the Exchange Guarantee."
Distributions on the Exchange Preferred Securities will be payable to
the holders thereof as they appear on the books and records of the Trust on the
relevant record dates, which will be one day prior to the relevant payment dates
(fifteen days if the Exchange Preferred Securities do not remain in
book-entry-only form). Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment will be made as described under
"Form,
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Denomination, Book-Entry Procedures and Transfer" below. In the event that any
date on which Distributions are payable on the Exchange Preferred Securities is
not a Business Day (as defined below), payment of the Distribution payable on
such date will be made on the next succeeding day which is a Business Day
(without any distribution or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on such date. A "Business Day" shall mean any
day other than a day on which banking institutions in the City of New York are
authorized or required by law to close.
So long as no Event of Default under the Indenture shall have occurred
and be continuing, the Company has the right under the Indenture to defer
payment of interest on the Exchange Notes at any time or from time to time for a
period not exceeding ten consecutive semi-annual periods (collectively, an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity Date. As a consequence of any such deferral of interest payments
by the Company, semi-annual Distributions on the Exchange Preferred Securities
will also be deferred by the Trust during any such Extension Period.
Distributions to which holders of the Exchange Preferred Securities are entitled
will accumulate additional Distributions thereon at the rate per annum of 9 1/2%
thereof, compounded semi-annually from the relevant payment date for such
Distributions. The term "Distributions" as used herein shall include any such
additional Distributions.
During any such Extension Period, the Company may extend such Extension
Period, provided that such extension does not cause such Extension Period to
exceed ten consecutive semi-annual periods or to extend beyond the Stated
Maturity Date. Upon the termination of any such Extension Period and the payment
of all amounts then due, and subject to the foregoing limitations, the Company
may elect to begin a new Extension Period. The Company must give the Preferred
Trustee and the Indenture Trustee notice of its election of any Extension Period
or any extension thereof at least five Business Days prior to the earlier of (i)
the date the Distributions on the Exchange Preferred Securities would have been
payable except for the election to begin or extend such Extension Period and
(ii) the date the Trustees are required to give notice to any securities
exchange or to holders of the Exchange Preferred Securities of the record date
or the date such Distributions are payable, but in any event not less than five
Business Days prior to such record date. There is no limitation on the number of
times that the Company may elect to begin an Extension Period. Such deferral
shall not be deemed a default under the Indenture. Such extension shall not be
deemed a default under the Indenture. See "Description of the Exchange Notes"
and "Certain United States Federal Income Tax Considerations."
During any such Extension Period, the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's Capital Stock, (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Senior Subordinated Notes subject
to certain exceptions described herein or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in right of
payment to the Senior Subordinated Notes (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Exchange
Guarantee, (d) as a result of a reclassification of the Company's Capital Stock
or the exchange or conversion of one class or series of the Company's Capital
Stock for another class or series of the Company's Capital Stock, (e) the
purchase of fractional interests in shares of the Company's Capital Stock
pursuant to the conversion or exchange provisions of such Company Capital Stock
or the security being converted or exchanged and (f) purchases or issuances of
Common Stock in connection with any of the Company's stock option, stock
purchase, stock loan or other benefit plans for its directors, officers or
employees or any of the Company's dividend reinvestment plans, in each case as
now existing or hereafter established or amended). See "Description of Exchange
Notes."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Exchange
Notes.
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Optional Redemption
The Company is permitted to redeem the Exchange Notes in whole or in
part, from time to time, after August 15, 2007, upon not less than thirty nor
more than sixty days' notice. See "Description of the Exchange Notes -- Optional
Redemption." Upon any redemption in whole or in part of the Exchange Notes at
the option of the Company, the proceeds from such redemption shall
simultaneously be applied by the Trust to redeem Exchange Preferred Securities
and Common Securities at the prices set forth herein, plus accrued and unpaid
Distributions thereon to the date fixed for redemption ("Redemption Price")
together with the related amount of the premium, if any, paid by the Company
upon the concurrent redemption of such Exchange Notes. See "Description of
Exchange Notes -- Optional Redemption."
In the event that fewer than all the outstanding Exchange Notes are to
be so redeemed, then the proceeds from such redemption shall be allocated to the
redemption pro rata of the Exchange Preferred Securities and the Common
Securities.
In the event of any redemption in part, the Trust shall not be required
to (i) issue, register the transfer of or exchange any of the Exchange Preferred
Securities during a period beginning at the opening of business fifteen days
before any selection for redemption of Exchange Preferred Securities and ending
at the close of business on the earliest date in which the relevant notice of
redemption is deemed to have been given to all holders of Exchange Preferred
Securities to be so redeemed and (ii) register the transfer of or exchange any
Exchange Preferred Securities so selected for redemption, in whole or in part,
except for the unredeemed portion of any Exchange Preferred Securities being
redeemed in part.
Tax Event or Investment Company Event Redemption or Distribution
If a Tax Event or Investment Company Event (as defined herein) shall
occur and be continuing, the Company shall cause the Trustees to dissolve and
liquidate the Trust and, after satisfaction of the liabilities of the Trust,
cause the Exchange Notes to be distributed to the holders of the Trust
Securities in liquidation of the Trust within ninety days following the
occurrence of such Tax Event; provided, however, that such liquidation and
distribution shall be conditioned on (i) the Trustees' receipt of an opinion of
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Exchange Preferred
Securities will not recognize any income, gain or loss for United States federal
income tax purposes as a result of such liquidation and distribution of Exchange
Notes and (ii) the Company being unable to avoid such Tax Event within such
90-day period by taking some ministerial action or pursuing some other
reasonable measure that will have no adverse effect on the Trust, the Company or
the holders of the Exchange Preferred Securities and will involve no material
cost. Furthermore, if (i) the Company has received an opinion (a "Redemption Tax
Opinion") of independent tax counsel experienced in such matters that, as a
result of a Tax Event, there is more than an insubstantial risk that the Company
would be precluded from deducting the interest on the Exchange Notes for United
States federal income tax purposes, even after the Exchange Notes were
distributed to the holders of the Exchange Preferred Securities upon liquidation
of the Trust as described above or (ii) the Trustees shall have been informed by
such tax counsel that it cannot deliver a No Recognition Opinion, the Company
shall have the right, upon not less than thirty nor more than sixty days' notice
and within ninety days following the occurrence of the Tax Event, to redeem the
Exchange Notes, in whole (but not in part) for cash, at 100% of the principal
amount thereof plus accrued and unpaid interest and, following such redemption,
all the Exchange Preferred Securities and Common Securities will be redeemed by
the Trust at the Liquidation Amount of $1,000 per Trust Security plus accrued
and unpaid Distributions; provided, however, that, if at the time there is
available to the Company or the Trust the opportunity to eliminate, within such
ninety-day period, the Tax Event by taking some ministerial action or pursuing
some other reasonable measure that will have no adverse effect on the Trust, the
Company or the holders of the Exchange Preferred Securities and will involve no
material cost, the Trust or the Company will pursue such measure in lieu of
redemption. See " -- Mandatory Redemption."
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If the Company does not elect any of the options described above, the
Exchange Preferred Securities will remain outstanding until repayment of the
Exchange Notes, whether at maturity or redemption, and in the event a Tax Event
has occurred and is continuing pursuant to the Indenture, the Company will be
obligated to pay any additional taxes, duties, assessments and other
governmental charges (other than withholding taxes) to which the Trust has
become subject as a result of the Tax Event as additional interest on the
Exchange Notes.
"Tax Event" means that the Company shall have obtained an opinion of an
independent tax counsel experienced in such matters to the effect that, as a
result of (i) any amendment to or change (including any announced proposed
change) in the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (ii) any
amendment to or change in an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of any
judicial decision or regulatory determination on or after the date of issuance
of the Exchange Preferred Securities), which amendment or change is effective or
which proposed change, interpretation or pronouncement is announced on or after
the date of this Prospectus, there is more than an insubstantial risk that (i)
the Trust is or, within ninety days of the delivery of opinion of counsel, will
be subject to United States federal income tax with respect to interest received
or accrued on the Senior Subordinated Notes, (ii) interest payable to the Trust
on the Senior Subordinated Notes is not or, within ninety days of the delivery
of opinion of counsel, will not be deductible for United States federal income
tax purposes by the Company or (iii) the Trust is or, within ninety days of the
delivery of opinion of counsel, will be subject to more than a de minimis amount
of other taxes, duties, assessments or other governmental charges of whatever
nature imposed by the United States or any other taxing authority.
"Investment Company Event" means the receipt by the Company of an
Opinion of Counsel, rendered by an independent law firm having experience in tax
and securities matters, to the effect that, as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the Trust is or will be considered an
"investment company" that is required to be registered under the 1940 Act, which
Change in 1940 Act Law becomes effective on or after the date of original
issuance of the Preferred Securities of the Trust.
Mandatory Redemption
The Exchange Notes will mature on August 15, 2027 and may be redeemed,
in whole or in part, at any time after August 15, 2007 or at any time in certain
circumstances upon the occurrence of a Tax Event or an Investment Company Event.
Upon the repayment of the Exchange Notes, whether at maturity, upon redemption,
by declaration or otherwise, after satisfaction of the liabilities of the Trust,
the proceeds from such repayment or redemption shall simultaneously be applied
to redeem Trust Securities having an aggregate Liquidation Amount equal to the
Exchange Notes so repaid or redeemed at the Redemption Price together with the
related amount of premium, if any, paid by the Company upon the concurrent
redemption of such Exchange Notes, provided that holders of the Trust Securities
shall be given not less than thirty nor more than sixty days' notice of such
redemption. See " -- Tax Event or Investment Company Event Redemption or
Distribution," "Description of the Exchange Notes -- General" and "Optional
Redemption." If less than all of the Exchange Notes are to be repaid or
redeemed, then the proceeds from such prepayment or redemption shall be
allocated to the redemption pro rata of the Exchange Preferred Securities and
the Common Securities. The amount of premium, if any, paid by the Company upon
the redemption of all or any part of the Exchange Notes to be repaid or redeemed
shall be allocated to the redemption pro rata of the Exchange Preferred
Securities and the Common Securities.
Change of Control Redemption
Upon the occurrence of a Change of Control Triggering Event (as defined
herein), a holder of Trust Securities has the right to require the Trust to
exchange all or any part of the holder's Trust Securities for Notes having an
aggregate principal amount equal to the aggregate Liquidation Amount of the
Trust Securities so offered. Upon the occurrence of such an event, the Company
will be required to immediately redeem any Exchange Notes so exchanged
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at a redemption price equal to 101% of the principal amount thereof plus any
accrued and unpaid interest. See "Description of the Exchange Notes -- Change of
Control."
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary liquidation, dissolution,
winding up or termination of the Trust, the holders of Trust Securities at the
time will be entitled to receive out of the assets of the Trust available for
Distribution to holders of Trust Securities after satisfaction of liability to
creditors of the Trust an amount equal to the aggregate of the stated
Liquidation Amount of $1,000 per each of the Exchange Preferred Securities and
accrued and unpaid distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such liquidation,
dissolution, winding up or termination, Senior Subordinated Notes in an
aggregate principal amount equal to the Liquidation Distribution have been
distributed on a pro rata basis to the holders of the Exchange Preferred
Securities. If such Liquidation Distribution can be paid only in part because
the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on the
Exchange Preferred Securities shall be paid on a pro rata basis. The holder(s)
of the Trust's Common Securities will be entitled to receive distributions upon
any such liquidation pro rata with the holders of the Exchange Preferred
Securities, except that if a Declaration Event of Default has occurred and is
continuing, the Exchange Preferred Securities shall have a priority over the
Common Securities.
Pursuant to the Declaration, the Trust shall be dissolved and its
affairs shall be wound up upon the earliest to occur of the following: (i)
August 15, 2047, the expiration of the term of the Trust, (ii) the bankruptcy,
liquidation or dissolution of the Company, (iii) the revocation of the Company's
charter and the expiration of 90 days after the date of revocation without a
reinstatement thereof, (iv) the entry of a decree of judicial dissolution of the
Company or the Trust by a court of competent jurisdiction, (v) all of the Trust
Securities have been called for redemption and the Redemption Price has been
paid to the holders in accordance with the terms of the Trust Securities, (vi)
the distribution of all of the Trust Property (as defined in the Declaration),
(viii) the written direction to the Preferred Trustee from the Company at any
time (which direction is optional and wholly within the discretion of the
Company) to dissolve the Trust and distribute the Senior Subordinated Notes to
the holders thereof in exchange for the Exchange Preferred Securities, (ix) the
redemption of all of the Exchange Preferred Securities in connection with the
redemption of all of the Senior Subordinated Notes, (x) subject to certain
conditions, the occurrence of a Tax Event, (xi) the occurrence of an Investment
Company Event or (xii) the occurrence of a Change of Control Triggering Event.
Redemption Procedures
The Exchange Preferred Securities will not be redeemed unless all
accrued and unpaid Distributions have been paid on all Exchange Preferred
Securities for all semi-annual distribution periods terminating on or prior to
the date of redemption.
If the Trust gives a notice of redemption in respect of Exchange
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York City time, on the redemption date, the Trust will irrevocably deposit
with DTC funds sufficient to pay the amount payable on redemption and will give
DTC irrevocable instructions and authority to pay such amount in respect of
Exchange Preferred Securities represented by the Global Exchange Preferred
Securities and will irrevocably deposit with the paying agent for the Exchange
Preferred Securities funds sufficient to pay such amount in respect of any
Exchange Preferred Securities and will give such paying agent irrevocable
instructions and authority to pay such amount to the holders of Exchange
Preferred Securities upon surrender of their certificates. Notwithstanding the
foregoing, Distributions payable on or prior to the redemption date for any
Exchange Preferred Securities called for redemption shall be payable to the
holders of such Exchange Preferred Securities on the relevant record dates for
the related Distribution dates. If notice of redemption shall have been given
and funds are deposited as required, then upon the date of such deposit, all
rights of holders of such Exchange Preferred Securities so called for redemption
will cease; except for the right of the holders of such Exchange Preferred
Securities to receive the redemption price and any Distributions payable on or
prior to the date of redemption, but without interest on such redemption price.
In the event that any date fixed for redemption of Exchange Preferred Securities
is not a Business
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Day, then payment of the amount payable on such date will be made on the next
succeeding day which is a Business Day (without any interest on other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the redemption price in respect of Exchange
Preferred Securities is improperly withheld or refused and not paid by the Trust
or the sponsor pursuant to the Exchange Guarantee, Distributions on such
Exchange Preferred Securities will continue to accrue at the then applicable
rate, from the original redemption date to the date of payment, in which case
the actual payment date will be considered the date fixed for redemption for the
purpose of calculating the amount payable upon redemption (other than for the
purpose of calculating any premium).
Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Company or its
Subsidiaries may at any time and from time to time purchase outstanding Exchange
Preferred Securities by tender, in the open market or by private agreement. If
less than all of the Exchange Preferred Securities and Common Securities are to
be redeemed, then the aggregate Liquidation Amount of such Exchange Preferred
Securities and Common Securities to be redeemed shall be allocated pro rata to
the Preferred Securities and the Common Securities based upon the relative
liquidation amounts of such classes. The Preferred Trustee shall promptly notify
the trust registrar in writing of the portion of the Preferred Securities to be
redeemed. For all purposes of the Declaration, unless the context otherwise
requires, all provisions relating to the redemption of Exchange Preferred
Securities shall relate, in the case of any Preferred Securities redeemed or to
be redeemed only in part, to the portion of the aggregate Liquidation Amount of
Preferred Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least thirty days but nor
more than sixty days before the date of the redemption to each holder of Trust
Securities to be redeemed at its registered address. Unless the Company defaults
in payment of the redemption price on the Exchange Notes, on and after the date
of the redemption interest ceases to accrue on such Exchange Notes or portions
thereof (and Distributions cease to accrue on the Exchange Preferred Securities
or portions thereof) called for redemption.
Subordination of Common Securities
Payment of Distributions on, and the amount payable upon redemption or
liquidation of, the Trust Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of such Trust Securities; provided, however,
that, if on any distribution date or redemption date a Declaration Event of
Default (as defined below) under the Declaration shall have occurred and be
continuing, no payment of any distribution on, or amount payable upon redemption
of, any Common Security, and no other payment on account of the redemption,
liquidation or other acquisition of Common Securities, shall be made unless
payment in full in cash of accumulated and unpaid Distributions on all
outstanding Exchange Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the amount payable
upon redemption of the Exchange Preferred Securities, the full amount thereof in
respect of all outstanding Exchange Preferred Securities, shall have been made
or provided for, and all funds available to the Preferred Trustee shall first be
applied to the payment in full in cash of all Distributions on, or the amounts
payable upon redemption of, Preferred Securities then due and payable.
In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived the right to act with respect to any
such Declaration Event of Default until all such Declaration Events of Default
with respect to the Exchange Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Declaration Events of Default with respect
to the Exchange Preferred Securities have been cured, waived or otherwise
eliminated, the Trustees shall act solely on behalf of the holders of the
Exchange Preferred Securities and not the holder of the Common Securities, and
only the holders of the Exchange Preferred Securities will have the right to
direct the Trustees to act on their behalf.
Declaration Events of Default
An event of default under the Indenture (an "Event of Default") or a
default by the Company under the Exchange Guarantee constitutes an event of
default under the Declaration with respect to the Trust Securities (a
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"Declaration Event of Default"); provided that pursuant to the Declaration, the
holder(s) of the Common Securities will be deemed to have waived any Declaration
Event of Default with respect to the Common Securities until all Declaration
Events of Default with respect to the Exchange Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Exchange Preferred Securities have been so cured, waived or
otherwise eliminated, the Preferred Trustee will be deemed to be acting solely
on behalf of the holders of the Exchange Preferred Securities and only the
holders of the Exchange Preferred Securities will have the right to direct the
Preferred Trustee with respect to certain matters under the Declaration and,
therefore, the Indenture.
If a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest on or
principal of the Senior Subordinated Notes on the date such interest or
principal is otherwise payable (or in the case of redemption, the redemption
date), unless such payment is otherwise excused for the reasons herein stated,
then holders of not less than 25% in Liquidation Amount of outstanding Exchange
Preferred Securities have the right to appoint a trustee (the "Special Trustee")
to act on behalf of all holders of Exchange Preferred Securities. The Special
Trustee appointed in accordance with the preceding sentence will represent the
holders of all outstanding Exchange Preferred Securities unless the holders of
at least a majority in Liquidation Amount of the outstanding Exchange Preferred
Securities appoint an alternative Special Trustee in which case the Special
Trustee appointed in accordance with the preceding sentence will be required to
resign as Special Trustee. At no time can there be more than one Special Trustee
acting on behalf of the holders of Exchange Preferred Securities. The Special
Trustee will have the right to directly institute a proceeding against the
Company (a "Trustee Action") for enforcement of payment to the Holders of
Exchange Preferred Securities of the principal of or interest on the Exchange
Notes having a principal amount equal to the aggregate Liquidation Amount of the
Exchange Preferred Securities of such Holders. In connection with such action,
the rights of the Company as holder of Common Securities will be subrogated to
the rights of the Holders of Exchange Preferred Securities under the Declaration
to the extent of any payment made by the Company to such Holders in such Trustee
action. If the Preferred Trustee or the Special Trustee do not enforce such
payment obligations, a holder of Exchange Preferred Securities will have the
right to bring an action on behalf of the Trust to enforce the Trust's rights
under the Exchange Notes and the Indenture. The holders of Exchange Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Exchange Notes.
Upon the occurrence of a Declaration Event of Default, the Preferred
Trustee as the sole holder of the Exchange Notes will have the right under the
Indenture to declare the principal of and interest on the Exchange Notes to be
immediately due and payable. The Company and the Trust are each required to file
annually with the Preferred Trustee an officer's certificate as to its
compliance with all conditions and covenants under the Declaration.
Merger, Consolidation or Amalgamation of the Trust
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below, or as described in "Liquidation Distribution Upon Dissolution."
The Trust may, without the consent of the holders of the Exchange Preferred
Securities, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets substantially as an entirety
to, a trust organized as such under the laws of any state of the United States
of America; provided that (i) if the Trust is not the survivor, such successor
entity either (x) expressly assumes all of the obligations of the Trust under
the Trust Securities or (y) substitutes for the Trust Securities other
securities having substantially the same terms as the Trust Securities (the
"Successor Securities") as long as the Successor Securities rank the same as the
Trust Securities with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Company expressly appoints a trustee of the
successor entity that possesses the same powers and duties as the Preferred
Trustee as the holder of the Senior Subordinated Notes, (iii) the Exchange
Preferred Securities or any Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Exchange Preferred
Securities are then listed, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Exchange Preferred Securities (including any Successor Securities) to be
downgraded by any statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Trust Securities (including any Successor
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Securities) in any material respect, (vi) such successor entity has a purpose
substantially identical to that of the Trust, (vii) the Company has provided a
guarantee to the holders of the Successor Securities with respect to such
successor entity having substantially the same terms as the Exchange Guarantee
and (viii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Company has received an opinion of
independent counsel to the Trust experienced in such matters to the effect that
(x) such successor entity will be treated as a grantor trust for United States
federal income tax purposes or otherwise as an entity that is not subject to
United States federal income tax at the entity level and the assets and income
of which are treated for United States federal income tax purposes as held and
derived directly by holders of interests in the entity, (y) following such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Company nor such successor entity will be required to register as an
investment company under the 1940 Act and (z) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease will not adversely
affect the rights, preferences, privileges and limited liability of the Exchange
Preferred Securities in any material respect. Notwithstanding the foregoing, the
Trust shall not, except with the consent of the holders of 100% in Liquidation
Amount of the Trust Securities, consolidate, amalgamate, merge with or into, be
replaced by, convey, transfer or lease its properties and assets substantially
as an entirety to, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into or replace it, if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity to be classified as other than a grantor trust for
United States federal income tax purposes or another entity which is not subject
to United States federal income tax at the entity level and the assets and
income of which are treated for United States federal income tax purposes as
held and derived directly by holders of interests in the entity.
Voting Rights
Except as described herein and under "Description of the Exchange
Guarantee -- Amendments and Assignment" and as provided in the Delaware Business
Trust Act and the Trust Indenture Act and as otherwise required by law and the
Declaration, the holders of the Preferred Securities will have no voting rights.
Subject to the requirement of the Preferred Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate Liquidation Amount of the
Exchange Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Preferred
Trustee or Special Trustee, if approved, or direct the exercise of any trust or
power conferred upon the Preferred Trustee under the Declaration including the
right to direct the Preferred Trustee, as holder of the Senior Subordinated
Notes, to (i) exercise the remedies available under the Indenture with respect
to the Senior Subordinated Notes, (ii) waive any past Event of Default that may
be waived under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Exchange Notes shall be due and
payable or (iv) consent to any amendment, modification, or termination of the
Indenture or the Exchange Notes where such consent shall be required; provided,
however, that where a consent or action under the Indenture would require the
consent or act of the holders of more than a majority of the aggregate principal
amount of Exchange Notes affected thereby, only the holders of the percentage of
the aggregate stated Liquidation Amount of the Exchange Preferred Securities
which is at least equal to the percentage required under the Indenture may
direct the Preferred Trustee to give such consent or take such action. The
Trustees shall not revoke any action previously authorized or approved by a vote
of holders of Preferred Securities except by subsequent vote of the holders of
Preferred Securities. If the Preferred Trustee or the Special Trustee fails to
enforce its rights under the Exchange Notes to receive interest or principal on
the Exchange Notes on the date such interest or principal is otherwise payable
(or in the case of redemption, the redemption date), a holder of record of
Exchange Preferred Securities may institute a legal proceeding on behalf of the
Trust against the Company to enforce the Trust's rights under the Exchange Notes
without first instituting any legal proceeding against the Preferred Trustee or
any other person or entity. The holders of the Exchange Preferred Securities
would not be able to exercise directly any other remedies available to the
holder of the Exchange Notes unless the Preferred Trustee or the Indenture
Trustee, acting for the benefit of the Preferred Trustee, fails to do so. In
such event, the holders of at least 25% in aggregate Liquidation Amount of
outstanding Exchange Preferred Securities would have a right to institute such
proceedings. The Preferred Trustee shall notify all holders of the Exchange
Preferred Securities of any notice of default received from the Indenture
Trustee with respect to the Exchange Notes. Such notice shall state that such
Event of Default also constitutes a Declaration Event of Default. Except with
respect to directing the time, method and place
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of conducting a proceeding for a remedy, the Preferred Trustee shall not take
any of the actions described in clause (i), (ii) or (iii) above unless the
Preferred Trustee has obtained an opinion of tax counsel to the effect that, as
a result of such action, the Trust will not fail to be classified as a grantor
trust for United States federal income tax purposes or another entity which is
not subject to United States federal income tax at the entity level and the
assets and income of which are treated for United States federal income tax
purposes as held and derived directly by holders of interests in the entity.
In the event the consent of the Preferred Trustee, as the holder of the
Exchange Notes, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Preferred Trustee shall
request the direction of the holders of the Exchange Preferred Securities with
respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a majority
in Liquidation Amount of the Exchange Preferred Securities; provided, however
that where a consent under the Indenture would require the consent of the
holders of more than a majority of the aggregate principal amount of the
Exchange Notes, the Preferred Trustee may only give such consent at the
direction of the holders of at least the same proportion in accordance with the
directions of the holders of the Exchange Preferred Securities unless the
Preferred Trustee has obtained an opinion of tax counsel to the effect that for
the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust or another entity which is not subject
to United States federal income tax at the entity level and the assets and
income of which are treated for United States federal income tax purposes as
held and derived directly by holders of interests in the entity.
A waiver of an Event of Default under the Indenture will constitute a
waiver of the corresponding Declaration Event of Default.
Any required approval of direction of holders of Exchange Preferred
Securities may be given at a separate meeting of holders of Exchange Preferred
Securities convened for such purpose, at a meeting of all of the holders of
Trust Securities or pursuant to written consent. The Trustees will cause a
notice of any meeting at which holders of Exchange Preferred Securities are
entitled to vote, or of any matter which action by written consent of such
holders is to be taken, to be mailed to each holder of record of Exchange
Preferred Securities. Each such notice will include a statement setting forth
the following information: (i) the date, place and purpose of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such consent of the holders of Exchange Preferred
Securities which will be required for the Trust to redeem and cancel Exchange
Preferred Securities or distribute Exchange Notes in accordance with the
Declaration.
Notwithstanding that holders of Exchange Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Exchange Preferred Securities that are owned at such time by the Company
or any entity directly or indirectly controlling or controlled by, or under
direct or indirect common control with, the Company, shall not be entitled to
vote or consent and shall, for purposes of such vote or consent, be treated as
if such Exchange Preferred Securities were not outstanding.
The procedures by which holders of Exchange Preferred Securities may
exercise their voting rights are described below.
Holders of the Exchange Preferred Securities will have no rights to
appoint or remove, or increase or decrease the number of, the Trustees, who may
be appointed, removed or replaced, increased or decreased solely by the Company
as the indirect or direct holder of all of the Common Securities.
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Modification of the Declaration
The Declaration may be modified and amended by the Trustees and the
Company, provided, that if any proposed amendment provides for, or the Trustees
or the Company otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the Trust Securities,
whether by way of amendment to the Declaration or otherwise or (ii) the
dissolution, winding-up or termination of the Trust other than pursuant to the
terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in Liquidation Amount of the Trust Securities
affected thereby; provided that if any amendment or proposal referred to in
clause (i) above would adversely affect only the Exchange Preferred Securities
or the Common Securities, then only the affected class will be entitled to vote
on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of at least a majority in Liquidation Amount
of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made
to the Declaration if such amendment or modification would (i) cause the Trust
to be classified for purposes of United States federal income taxation as other
than a grantor trust or another entity which is not subject to United States
federal income tax at the entity level and the assets and income of which are
treated for United States federal income tax purposes as held and derived
directly by holders of interests in the entity, (ii) reduce or otherwise
adversely affect the powers of the Trustees or (iii) cause the Trust to be
deemed an "investment company" which is required to be registered under the 1940
Act.
Form, Denomination, Book-Entry Procedures and Transfer
The Exchange Preferred Securities initially will be represented by one
or more Exchange Preferred Securities certificates in registered, global form
(collectively, the "Global Exchange Preferred Securities"). The Global Exchange
Preferred Securities will be deposited upon issuance with the Preferred Trustee
as custodian for DTC, in New York, New York, and registered in the name of DTC
or its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Exchange Preferred Securities may
be transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Exchange
Preferred Securities may not be exchanged for Exchange Preferred Securities in
certificated form except in the limited circumstances described below. See " --
Exchange of Book-Entry Preferred Securities for Certificated Exchange Preferred
Securities."
Depository Procedures
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to
procedure established by it, (i) upon deposit of the Global Exchange Preferred
Securities, DTC will credit the accounts of Participants with portions of the
Liquidation Amount of the Global Exchange Preferred Securities and (ii)
ownership of such interests in the Global Exchange Preferred Securities will be
shown on, and the transfer of ownership thereof will be effected only through,
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records maintained by DTC (with respect to the Participants ) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Exchange Preferred Securities).
Except as described below, owners of interests in the Global Exchange
Preferred Securities will not have Exchange Preferred Securities registered in
their name, will not receive physical delivery of Exchange Preferred Securities
in certificated form and will not be considered the registered owners or holders
thereof under the Declaration for any purpose.
Payments in respect of the Global Exchange Preferred Security
registered in the name of DTC or its nominee will be payable by the Preferred
Trustee to DTC in its capacity as the registered holder under the Trust
Agreement. Under the terms of the Declaration, the Preferred Trustee will treat
the persons in whose names the Exchange Preferred Securities, including the
Global Exchange Preferred Securities, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Preferred Trustee nor any agent thereof
has or will have any responsibility or liability for (i) any aspect of DTC's
records or any Participant's or Indirect Participant's records relating to or
payments made on account of beneficial ownership interests in the Global
Exchange Preferred Securities, or for maintaining, supervising or reviewing any
of DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Exchange Preferred
Securities or (ii) any other matter relating to the actions and practices of DTC
or any of its Participants or Indirect Participants. DTC has advised the Trust
and the Company that its current practice, upon receipt of any payment in
respect of securities such as the Exchange Preferred Securities, is to credit
the accounts of the relevant Participants with the payment on the payment date,
in amounts proportionate to their respective holdings in Liquidation Amount of
beneficial interests in the relevant security as shown on the records of DTC
unless DTC has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to be
beneficial owners of Exchange Preferred Securities will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility of
DTC, the Preferred Trustee, the Trust or the Company. None of the Trust, the
Company or the Preferred Trustee will be liable for any delay by DTC or any of
its Participants in identifying the beneficial owners of the Preferred
Securities, and the Trust or the Company and the preferred Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Beneficial interests in the Global Exchange Preferred Securities will
trade in DTC's Same-Day Funds Settlement System and secondary market trading
activity in such interest will therefore settle in immediately available funds,
subject in all cases to the rules and procedures of DTC and its participants.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Exchange Preferred Securities only at the
direction of one or more Participants on whose account with DTC interests in the
Global Exchange Preferred Securities are credited and only in respect of such
portion of the Liquidation Amount of the Exchange Preferred Securities as to
which such Participant or Participants has or have given such direction However,
if there is a Indenture Event of Default, DTC reserves the right to exchange the
Global Exchange Preferred Securities for legended Exchange Preferred Securities
in certificated form and to distribute such Exchange Preferred Securities to its
Participants.
The information in this section concerning DTC and its book-entry
system has been obtained from sources that the Trust and the Company believe to
be reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
Exchange of Book-Entry Exchange Preferred Securities for Certificated Exchange
Preferred Securities
A Global Exchange Preferred Security is exchangeable for Exchange
Preferred Securities in registered certificated form if (i) DTC (x) notifies the
Trust that it is unwilling or unable to continue as Depository for the Global
Exchange Preferred Security and the Trust thereupon fails to appoint a successor
Depository within ninety days or (y) has ceased to be a clearing agency
registered under the Exchange Act, (ii) the Company in its sole discretion
elects to
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cause the issuance of the Exchange Preferred Securities in certificated form or
(iii) there shall have occurred and be continuing an Indenture Event of Default
or any event which after notice or lapse of time or both would be an Indenture
Event of Default. In addition, beneficial interests in a Global Exchange
Preferred Security may be exchanged for certificated Exchange Preferred
Securities upon request but only upon at least twenty days prior written notice
given to the Preferred Trustee by or on behalf of DTC in accordance with
customary procedures. In all cases, certificated Exchange Preferred Securities
delivered in exchange for any Global Exchange Preferred Security or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depository (in accordance with
its customary procedures) and will bear the legend referred to in "Notice to
Investors," unless the Preferred Trustee determines otherwise in compliance with
applicable law.
Payment and Paying Agency
Payments in respect of the Exchange Preferred Securities shall be made
to DTC, which shall credit the relevant accounts at DTC on the applicable
distribution dates or, in the case of certificated Exchange Preferred
Securities, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the Register. The Paying
Agent shall initially be Wilmington Trust Company. The Paying Agent shall be
permitted to resign as Paying Agent upon thirty days' written notice to the
Trustees. In the event that Wilmington Trust Company shall no longer be the
Paying Agent, the Trustees shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company.)
Registrar and Transfer Agent
Wilmington Trust Company will act as registrar and transfer agent for
the Exchange Preferred Securities. Registration of transfers of Exchange
Preferred Securities will be effected without charge by or on behalf of the
Trust, but upon payment (with the giving of such indemnity as the Trust or the
Company may require) in respect of any tax or other government charges which may
be imposed in relation to it. The Trust will not be required to register or
cause to be registered the transfer of Exchange Preferred Securities after such
Exchange Preferred Securities have been called for redemption.
Information Concerning the Preferred Trustee
The Preferred Trustee, prior to default, undertakes to perform only
such duties as are specifically set forth in the Declaration and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the Preferred
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Exchange Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Preferred Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Preferred Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
Miscellaneous
The Company Trustees are authorized and directed to conduct the affairs
of and to operate the Trust in such a way that the Trust will not be deemed to
be an "investment company" required to be registered under the 1940 Act or
characterized as other than a grantor trust for United States federal income tax
purposes or otherwise as an entity that is not subject to United States federal
income tax at the entity level and the assets and income of which are treated
for United States federal income tax purposes as held and derived directly by
holders of interests in the entity, and so that the Exchange Notes will be
treated as Indebtedness of the Company for United States federal income tax
purposes. In this connection, the Company Trustees and the Company are
authorized to take any action, not inconsistent with the applicable law, the
certificate of trust or the Indenture that the Trustees determine in their
discretion to be necessary or desirable for such purposes as long as such action
does not adversely affect in any material respect the interests of the holders
of the Preferred Securities.
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Expenses and Taxes
The Trust was created solely to facilitate an investment in the Senior
Subordinated Notes; consequently, the Company, as borrower, has agreed in the
Indenture, to pay all debts and obligations (other than with respect to the
Securities and Common Securities) and all costs and expenses of the Trust
(including, but not limited to, all costs and expenses relating to the
organization of the Trust, and fees and expenses of the Trustees and all costs
and expenses relating to the operation of the Trust) and to pay any and all
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed on the Trust by the United States, or any other
taxing authority, so that the net amounts received and retained by the Trust and
the Preferred Trustee after paying such expenses will be equal to the amounts
the Trust and the Preferred Trustee would have received had no such costs or
expenses been incurred by or imposed on the Trust.
The foregoing obligations of the Company are for the benefit of, and
shall be enforceable by, any person or entity to which any such debts,
obligations, costs, expenses and taxes are owed (each a "Creditor") whether or
not such Creditor has received notice thereof. Any such Creditor may enforce
such obligations of the Company directly against the Company, and the Company
has irrevocably waived any right or remedy to require that any such Creditor
take any action against the Trust or any other person before proceeding against
the Company. The Company shall execute such additional agreement as may be
necessary or desirable to effect the foregoing.
Governing Law
The Declaration and the Exchange Preferred Securities will be governed
by and construed in accordance with the laws of the State of Delaware.
Information Concerning the Delaware Trustee
The Delaware Trustee is Wilmington Trust Company. The Delaware Trustee
shall be one of the trustees of the Trust for the sole and limited purpose of
fulfilling the requirements of the Delaware Business Trust Act for a trustee
that is either a natural person who is a resident of Delaware or a legal entity
with its principal place of business in that State.
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DESCRIPTION OF THE EXCHANGE NOTES
The Old Senior Subordinated Notes were issued and the Exchange Notes
will be issued as separate series under the Indenture. The Indenture has been
qualified under the Trust Indenture Act. The following summary does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Indenture. Capitalized terms not otherwise defined
herein have the meaning assigned to the in the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Tax Event, Change of Control Triggering Event or
Investment Company Event, Exchange Notes may be distributed to the holders of
the Exchange Preferred Securities in liquidation of the Trust. See "Description
of the Exchange Notes -- Tax Event or Investment Company Event Redemption or
Distribution" and "Description of the Exchange Notes -- Change of Control."
General
The Exchange Notes will be issued under the Indenture and will be
limited in aggregate principal amount to the sum of the aggregate stated
Liquidation Amount of the Trust Securities.
The Exchange Notes are not entitled to the benefit of any sinking fund.
The entire principal amount of the Exchange Notes will become due and payable,
together with any accrued and unpaid interest thereon, on August 15, 2027.
The Exchange Notes will initially be issued in fully registered
certificated form and held by the Preferred Trustee. If distributed to holders
of Exchange Preferred Securities in a dissolution of the Trust or following a
Change of Control Triggering Event, the Exchange Notes will then be issued as a
global security to the extent of any Global Exchange Preferred Securities at the
time representing any Exchange Preferred Securities and otherwise in fully
registered, certificated form. In the event that Exchange Notes are issued in
certificated form, such Exchange Notes will be in denominations of $1,000 and
integral multiples thereof and may be transferred or exchanged at the offices
described below.
Payments on Exchange Notes issued as a global security will be made in
immediately available funds to DTC, as the depository for the Exchange Notes. In
the event Exchange Preferred Securities are issued in certificated form,
principal and interest will be payable, the transfer of the Exchange Notes will
be registrable and Old Senior Subordinated Notes will be exchangeable for
Exchange Notes of other denominations of a like aggregate principal amount at
the corporate trust office of the Indenture Trustee; provided that, unless the
Exchange Notes are held by the Trust or any successor permissible as described
under "Description of the Exchange Preferred Securities -- Merger, Consolidation
or Amalgamation of the Trust," payment of interest may be made at the option of
the Company by check mailed to the addresses of the persons entitled thereto.
Interest
The Exchange Notes will bear interest at the rate of 9 1/2% per annum
from the original date of issuance, payable semi-annually in arrears on February
15 and August 15 (each, an "Interest Payment Date"), commencing February 15,
1998, to the person in whose name such Exchange Note is registered at the close
of business on the fifteenth day immediately preceding such Interest Payment
Date. Interest on the Exchange Notes will accrue from the most recent date on
which interest has been paid or, if no interest has been paid, from the Issue
Date. Interest in arrears for more than one semi-annual period (and interest
thereon) will accrue interest (compounded semi-annually) at the same rate, to
the extent permitted by applicable law.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve, thirty-day months. In the event that any date
on which interest is payable on the Exchange Notes is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (without
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any interest or other payment in respect of any such delay), except that, if
such Business Delay is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
Option to Extend Interest Payment Date
Unless an Event of Default has occurred and is continuing, the Company
will have the right under the Indenture at any time during the term of the
Exchange Notes to defer the payment of interest at any time or from time to time
for a period not exceeding ten consecutive semi-annual periods with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity Date. As a consequence of any such deferral, semi-annual
Distributions on the Exchange Preferred Securities by the Trust will be deferred
during any such Extension Period. At the end of an Extension Period, the Company
must pay all interest then accrued and unpaid (together with interest then
accrued at the annual rate of 9 1/2%, compounded semi-annually, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Exchange Notes (and holders of the Trust Securities
while Trust Securities are outstanding) will be required to accrue interest
income (in the form of OID) for United States federal income tax purposes prior
to the receipt of cash attributable to such income. See "Certain United States
Federal Income Tax Considerations -- Interest Income and Original Issue
Discount."
During any such Extension Period, the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's Capital Stock (which
includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu in all respect with or junior to
the Exchange Notes, subject to certain exceptions described herein or (iii) make
any guarantee payments with respect to any guarantee by the Company of the debt
securities of any Subsidiary of the Company if such guarantee ranks pari passu
with or junior in right of payment to the Exchange Notes (other than (a)
dividends or distributions in shares of or options, warrants or rights to
subscribe for or purchase shares of, Common Stock of the Company, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Exchange Guarantee, (d) as a result of a reclassification of
the Company's Capital Stock or the exchange or conversion of one class or series
of the Company's Capital Stock for another class or series of the Company's
Capital Stock, (e) the purchase of fractional interests in shares of the
Company's Capital Stock pursuant to the conversion or exchange provisions of
such Capital Stock or the security being converted or exchanged and (f)
purchases or issuances of Common Stock under any of the Company's stock option,
stock purchase, stock loan or other benefit plans for its directors, officers or
employees or any of the company's dividend reinvestment plans, in each case as
now existing or hereafter established or amended).
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed ten consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company must give the Preferred Trustee
and Indenture Trustee notice of its election of any Extension Period (or an
extension thereof) at least five Business Days prior to the earlier of (i) the
date the Distributions on the Exchange Preferred Securities would have been
payable except for the election to begin or extend such Extension Period or (ii)
the date the Trustees are required to give notice to any securities exchange or
to holders of Trust Securities of the record date or the date such Distributions
are payable, but in any event not less than five Business Days prior to such
record Date. The Indenture Trustee shall give notice of the Company's election
to begin or extend a new Extension Period to the holders of the Exchange
Preferred Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period. No such extension shall be
deemed an Event of Default under the Indenture.
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Optional Redemption
The Company shall have the right to redeem the Exchange Notes, in whole
or in part, at any time or from time to time after August 15, 2007, upon not
less than thirty or more than sixty day's notice, at the Redemption Prices (as
defined in the Indenture) (expressed as a percentage of principal amount) set
forth below plus accrued and unpaid interest to the Redemption Date (as defined
in the Indenture) (subject to the right of holders of record on the relevant
Regular Record Date (as defined in the Indenture) to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date) if redeemed
during the twelve-month period beginning on August 15 of the years indicated
below:
Percentage of
Year Principal Amount
- ---- ----------------
2007...............................................................104.750%
2008...............................................................103.167%
2009...............................................................101.583%
2010 and thereafter................................................100.000%
In the event of any redemption in part, the Company shall not be
required to (i) issue, register the transfer of or exchange any Exchange Note
during a period beginning at the opening of business fifteen days before any
selection for redemption of Exchange Notes and ending at the close of business
on the earliest date on which the relevant notice of redemption is deemed to
have been given to all holders of Exchange Notes to be so redeemed or (ii)
register the transfer of or exchange any Exchange Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any Exchange
Note being redeemed in part.
Subordination
The indebtedness evidenced by the Exchange Notes will be senior
subordinated obligations of the Company. The payment of the principal of
(including any payments on redemption or repurchase), premium (if any) and
interest on the Exchange Notes is subordinate in right of payment, as set forth
in the Indenture, to all Senior Indebtedness of the Company, whether outstanding
on the date the Exchange Notes are originally issued or thereafter incurred.
Although the Indenture contains limitations on the amount of Additional
Indebtedness that the Company may Incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be Senior Indebtedness. See "Certain Covenants."
The Exchange Notes will be issued in denominations of $1,000 and
integral multiples thereof. The Exchange Notes will mature on August 15, 2027
(the "Stated Maturity Date"). The Exchange Notes will be unsecured and
subordinate and rank junior in right of payment to the extent and in the manner
set forth in the Indenture to all Senior Indebtedness. Almost all of the
Company's assets consist of stock in the Subsidiaries. Consequently, the Company
relies primarily on dividends, interest and fees from such Subsidiaries to meet
its obligations. The Company is a legal entity separate and distinct from its
Subsidiaries. The principal sources of the Company's income are dividends,
interest and fees from its Subsidiaries. The Company's ability to meet debt
service obligations and pay operating expenses depends on receipt of sufficient
funds from its direct and indirect Subsidiaries. The inability of the Company's
direct and indirect Subsidiaries to pay dividends, interest and fees to the
Company in an amount sufficient to meet debt service obligations and pay
operating expenses would have a material adverse effect on the Company and the
Trust. The payment of dividends by the Company's Subsidiaries without prior
regulatory approval is subject to restrictions set forth in the insurance laws
and regulations of Indiana and Florida, the states of domicile of the Company's
Insurance Subsidiaries. The Company currently does not expect such regulatory
requirements to impair its ability to meet interest payment obligations and to
pay operating expenses in the future. However, the Company can give no assurance
that dividends will be declared or paid by its Subsidiaries. As of June 30,
1997, IGF and Pafco would be permitted to pay an aggregate of $12.7 million in
dividends without prior regulatory approval. In addition, payment of dividends
to the
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Company by the insurance Subsidiaries is subject to ongoing review by insurance
regulators and is subject to various statutory limitations and in certain
circumstances requires approval by insurance regulatory authorities. The right
of the Company to participate in any distribution of assets of any Subsidiary
upon such Subsidiary's liquidation or reorganization or otherwise is subject to
the prior claims of creditors of the Subsidiary, except to the extent the
Company may itself be recognized as a creditor of that Subsidiary. Accordingly,
the Exchange Notes will be effectively subordinated to all existing and future
liabilities of the Company's Subsidiaries, and holders of Exchange Notes should
look only to the assets of the Company for payments on the Exchange Notes. In
addition, because many of the Company's Subsidiaries are insurance companies
subject to regulatory control by various state insurance departments, the
ability of such Insurance Subsidiaries to pay dividends to the Company without
prior regulatory approval is limited by applicable laws and regulations. The
Indenture does not place a limitation on the amount of additional Senior
Indebtedness that may be incurred by the Company. However, the ability of the
Company and its Subsidiaries to incur indebtedness is restricted under the
Exchange Notes. The Company expects from time to time to incur additional
indebtedness constituting Senior Indebtedness. See "Description of the Exchange
Notes -- Certain Covenants."
The Company may not pay principal of, or premium (if any) or interest
on, the Exchange Notes and may not repurchase, redeem or otherwise retire any
Exchange Notes (collectively, "pay the Notes") if (i) the Specified Senior
Indebtedness is not paid when due or (ii) any other default on Specified Senior
Indebtedness of the Company occurs and the maturity of such Specified Senior
Indebtedness is accelerated in accordance with its terms, unless, in either
case, the default has been cured or waived and any such acceleration has been
rescinded or such Specified Senior Indebtedness has been paid in full. However,
the Company may pay the Exchange Notes without regard to the foregoing if the
Company and the Indenture Trustee receive written notice approving such payment
from a representative of the Specified Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Specified Senior Indebtedness of the
Company pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company may
not pay the Exchange Notes for a period (a "Payment Blockage Period") commencing
upon the receipt by the Indenture Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the representative of
the holders of such Specified Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the
Indenture Trustee and the Company from the representative of the holders of such
Specified Senior Indebtedness, (ii) because the default giving rise to such
Blockage Notice is no longer continuing or (iii) because such Specified Senior
Indebtedness has been repaid in full). Notwithstanding the provisions described
in the immediately preceding sentence, unless the holders of such Specified
Senior Indebtedness or the representative of such holders have accelerated the
maturity of such Specified Senior Indebtedness, the Company may resume payments
on the Exchange Notes after the end of such Payment Blockage Period. The
Exchange Notes shall not be subject to more than one Payment Blockage Period in
any consecutive 360-day period, irrespective of the number of defaults with
respect to Specified Senior Indebtedness during such period.
Upon any payment or distribution of the assets of the Company upon a
total or partial liquidation or dissolution or reorganization of or similar
proceeding relating to the Company or its property, the holders of Senior
Indebtedness of the Company will be entitled to receive payment in full of such
Senior Indebtedness before the holders of Senior Subordinated Notes are entitled
to receive any payment, and until the Senior Indebtedness of the Company is paid
in full, any payment or distribution to which holders of Senior Subordinated
Notes would be entitled but for the subordination provisions of the Indenture
will be made to holders of such Senior Indebtedness as their interests may
appear. If a distribution is made to holders of Senior Subordinated Notes, that,
due to the subordination provisions, should not have been made to them, such
holders are required to hold it in trust for the holders of Senior Indebtedness
of the Company and pay it over to them as their interests may appear.
If payment of the Exchange Notes is accelerated because of an Event of
Default, the Company or the Indenture Trustee shall promptly notify the holders
of Senior Indebtedness of the Company or the representative of such holders of
the acceleration. If any Senior Indebtedness is outstanding, the Company may not
pay the Notes until five Business
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Days after the representatives of all the issues of Senior Indebtedness receive
notice of such acceleration and, thereafter, may pay the Notes only if the
Indenture otherwise permits payment at that time.
By reason of the subordination provisions contained in the Indenture,
in the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness of the Company may recover more, ratably, than the holders of
Exchange Notes, and creditors of the Company who are not holders of Senior
Indebtedness may recover less, ratably, than holders of Senior Indebtedness and
may recover more, ratably, than the holders of Exchange Notes.
Certain Covenants
Limitation on Restricted Payments
(a) The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, make any Restricted Payment if at the time the
Company or such Subsidiary makes such Restricted Payment: (1) a Default
shall have occurred and be continuing (or would result therefrom), (2) the
Company is not able to Incur an additional $1.00 of Indebtedness pursuant
to paragraph (a) of the covenant described under "-- Limitation of
Incurrence of Indebtedness" or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date would exceed
the sum of: (A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the Issue Date to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, in case such Consolidated Net Income shall be a deficit, minus 100% of
such deficit), (b) the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary and Disqualified Stock) subsequent to the Issue Date (other than
an issuance or sale to a Subsidiary and other than an issuance or sale to
an employee stock ownership plan or to a trust established by the Company
or any of its Subsidiaries for the benefit of their employees) and (C) the
amount by which Indebtedness of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a Subsidiary),
subsequent to the Issue Date, of any indebtedness of the Company
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash, or the fair value of
any other property, distributed by the Company upon such conversion or
exchange).
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any purchase or redemption of stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified
Stock and other than Capital Stock issued or sold to a Subsidiary or an
employee stock ownership plan or to a trust established by the Company or
any of its Subsidiaries for the benefit of their employees); provided,
however, that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of amounts
under clause (3)(B) of paragraph (a) above, (ii) any purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value of
Subordinated Obligations made by exchange for, or out of the proceeds of
the substantially concurrent sale, of, Indebtedness of the Company which is
permitted to be Incurred pursuant to the covenant described under "--
Limitation on Incurrence of Indebtedness;" provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments; or (iii) dividends paid within sixty days after the
date of declaration thereof if at such date of declaration such dividend
would have complied with this covenants; provided, however, that at the
time of payment of such dividend, no other Default shall have occurred and
be continuing (or result therefrom); provided, however, that such dividend
shall be included in the calculation of the amount of Restricted Payments.
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Limitation on Incurrence of Indebtedness
(a) The Company shall not, and shall not permit any Subsidiary to,
Incur, directly or indirectly, any Indebtedness unless, on the date of such
Incurrence (and after giving effect thereto), the Consolidated Coverage
Ratio exceeds 2.5 to 1.
(b) The foregoing limitations contained in paragraph (a) do not apply
to the Incurrence of any of the following Indebtedness: (1) Indebtedness
under the Credit Agreement, (2) Indebtedness owed to an held by a Wholly
Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock that results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Indebtedness (other than to another Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of
such Indebtedness by the Company, (3) the Exchange Notes, (4) Capital Lease
Obligations and Indebtedness incurred, in each case, to provide all or a
portion of the purchase price or cost of construction of an asset or, in
the case of a sale/leaseback transaction, to finance the value of such
asset owned by the Company or a Subsidiary, in an aggregate principal
amount which, together with all other such Capital Lease Obligations and
Indebtedness outstanding on the date of such Incurrence (other than
Indebtedness permitted by paragraph (a) or clause (2) or (9) of this
paragraph (b)), does not exceed $3 million, (5) Refinancing Indebtedness in
respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to
clause (3) or (4) of this paragraph (b), (6) Hedging Obligations permitted
under the Credit Agreement as in effect on the Issue Date, (7) customer
deposits and advance payments received from customers for goods purchased
in the ordinary course of business and (8) Indebtedness in an aggregate
principal amount which, together with all other Indebtedness of the Company
and its Subsidiaries outstanding on the date of such Incurrence (other than
Indebtedness permitted by paragraph (a) or clauses (1) through (7) of this
paragraph (b)), does not exceed $5 million.
(c) Notwithstanding the foregoing, the Company shall not, and shall
not permit any Subsidiary to, Incur, directly or indirectly, any
Indebtedness (i) that is subordinate or junior in ranking in right of
payment to its Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment
to Senior Subordinated Indebtedness or (ii) pursuant to paragraph (b) above
if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to
the Exchange Notes to at least the same extent as such Subordinated
Obligations.
(d) For purposes of determining compliance with the foregoing
covenant, (i) in the event that an item of Indebtedness meets the criteria
of more than one of the types of Indebtedness described above, the Company,
in its sole discretion, will classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of the
above clauses and (ii) an item of Indebtedness may be divided and
classified in more than one of the types of Indebtedness described above.
Limitation on Restrictions on Distributions from Subsidiaries
The Company shall not, and shall not permit any Subsidiary to,
voluntarily create or otherwise cause or permit to exit or become effective any
consensual encumbrance or restriction on the ability of any subsidiary (a) to
pay dividends or make any other distribution on its Capital Stock to the Company
or any other Subsidiary or pay any Indebtedness owed to the Company or any other
Subsidiary, (b) to pay any management fees or billing fees to the Company or any
other Subsidiary, (c) to make any loans or advances to the Company or any other
Subsidiary or (d) transfer any of its property or assets to the Company or any
other Subsidiary, except: (i) any encumbrance or restriction pursuant to an
agreement in effect at or entered on the Issue Date, (ii) any encumbrance or
restriction with respect to a Subsidiary pursuant to an agreement relating to
any Indebtedness Incurred by such Subsidiary on or prior to the date on which
such subsidiary was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to
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provide all or any portion of the funds or credit support utilized to consummate
the transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company) and outstanding
on such date, (iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) above or this clause (iii) or contained in any
amendment to an agreement referred to in clause (i) or (ii) above or this
clause; provided, however, that the encumbrances and restrictions with respect
to such Subsidiary contained in any such refinancing agreement or amendment are
not less favorable to the holders of Senior Subordinated Notes than encumbrances
and restrictions with respect to such Subsidiary contained in such agreements,
(iv) any such encumbrance or restriction consisting of customary non- assignment
provisions in leases governing leasehold interest or in licensing agreements to
the extent such provisions restrict the transfer of the lease or the property
leased thereunder or the licensing agreement or the rights licensed thereunder,
(v) in the case of clause (d) above, restrictions contained in security
agreements or mortgages securing Indebtedness or a Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements or mortgages and(vi) any restriction with respect to a Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Subsidiary pending the
closing of such sale or disposition.
Limitation on Sales of Assets and Subsidiary Stock
(a) The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly consummate any Asset Disposition unless (i) the
Company or such Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the
value of all non-cash consideration), as determined in good faith by the
Board of Directors of the Company or such Subsidiary as the case may be, of
the shares and assets subject to such Asset Disposition and at least 75% of
the consideration thereof received by the Company or such Subsidiary is in
the form of cash, cash equivalents or Marketable Securities and (ii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition
is applied by the Company (or such Subsidiary, as the case may be) (A)
first, to the extent the Company elects (or is required by the terms of any
Senior Indebtedness), to prepay, repay, redeem or purchase Senior
Indebtedness or Indebtedness (other than any Disqualified Stock) of a
Wholly Owned Subsidiary (in each case other than Indebtedness owed to the
Company or an Affiliate of the Company) within eighteen months from the
later of the date of such Asset Disposition or the receipt of such Net
Available Cash, (B) second, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), to the
extent the Company elects, to acquire Additional Assets within eighteen
months from the later of the date of such Asset Disposition or the receipt
of such Net Available Cash and (C) third, to the extent of the balance of
such Net Available Cash after application in accordance with clauses (A)
and (B), to make an offer to the holder of the Senior Subordinated Notes to
purchase Senior Subordinated Notes pursuant to and subject to the
conditions contained in the Indenture; provided, however, that in
connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A) or (C) above, the Company or such Subsidiary shall
retire such Indebtedness and shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the principal amount
so prepaid, repaid or purchased. Notwithstanding the foregoing provisions
of this paragraph, the Company and the Subsidiaries shall not be required
to apply any Net Available Cash in accordance with this paragraph except to
the extent that the aggregate Net Available Cash from all Asset Disposition
which are not applied in accordance with this paragraph exceeds $5 million.
Pending application of Net Available Cash pursuant to this covenant, such
Net Available Cash shall be invested in Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash
or cash equivalents: (x) the assumption of Indebtedness of the Company or
any Subsidiary and the release of the Company or such Subsidiary from all
liability on such Indebtedness in connection with such Asset Disposition
and (y) securities received by the Company or any Subsidiary from the
transferee that are promptly converted by the Company or such Subsidiary
into cash.
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(b) In the event of an Asset Disposition that requires the purchase of
the Senior Subordinated Notes pursuant to clause (a)(ii)(C) above, the
Company will be required to purchase Exchange Notes tendered pursuant to an
offer by the Company for the Exchange Notes at a purchase price of 101% of
their principal amount (without premium) plus accrue but unpaid interest,
in accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. The Company shall not be
required to make such an offer to purchase Senior Subordinated Notes
pursuant to this covenant if the Net Available Cash available therefor is
less than $5 million (which lesser amount shall be carried forward for
purposes of determining whether such an offer is required with respect to
any subsequent Asset Disposition).
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Senior
Subordinated Notes pursuant to this covenant. To the extent that the
provisions of any securities laws or regulations conflict with provisions
of this covenant, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its
obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions
(a) The Company shall not, and shall not permit any Subsidiary to,
enter into any transaction (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction")
(other than reinsurance with an Affiliate in the ordinary course of
business) unless the terms thereof (1) are no less favorable to the Company
or such Subsidiary than those that could be obtained at the time of such
transaction in arm's length dealings with a Person who is not such an
Affiliate, (2) if such Affiliate Transaction involves an amount in excess
of $1 million, (i) are set forth in writing and (ii) have been approved by
a majority of the members of the Board of Directors of the Company or such
Subsidiary having no personal stake in such Affiliate Transaction and (3)
if such Affiliate Transaction involves an amount in excess of $2.5 million,
have been determined by a nationally recognized investment banking firm to
be fair from a financial standpoint to the Company and its Subsidiaries.
(b) The provisions of paragraph (a) above shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described
under " -- Limitation on Restricted Payments," (ii) transactions or
payments pursuant to any employee arrangements or employee or director
benefit plans entered into by the Company or any of its Subsidiaries in the
ordinary course of business of the Company or such Subsidiary and (iii) any
Affiliate Transaction between the company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries.
Senior Subordinated Indebtedness; Liens
The Company shall not, and shall not permit any Subsidiary to, Incur
(i) any Indebtedness if such Indebtedness is subordinate or junior in ranking in
any respect to any Senior Indebtedness, unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness or(ii) any Secured Indebtedness that is not
Senior Indebtedness unless (A) contemporaneously therewith effective provision
is made to secure the Senior Subordinated Noes equally and ratably with such
Secured Indebtedness for so long as such Secured Indebtedness is secured by a
Lien or (b) such Secured Indebtedness is permitted by clause (1), (4), (5) or
(7) of paragraph (b) of the covenant described under " -- Limitation on
Incurrence of Indebtedness."
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Limitation on Mergers, Acquisitions and Sales of Assets
The Indenture provides that the Company may not consolidate or merge
with or into (whether or not the Company is the Surviving Person), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties and assets in one or more related transactions, to another
Person unless (i) the Surviving Person is a corporation organized and existing
under the laws of the United States of America, any state thereof or the
District of Columbia, (ii) the Surviving Person (if other than the Company)
assumes all the obligations of the Company under the Senior Subordinated Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Indenture Trustee, (iii) at the time of and immediately
after such transaction, no Default or Event of Default shall have occurred and
be continuing, (iv) the Surviving Person will have Consolidated Net Worth
(immediately after the transaction) equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction, (v) at the time
of such transaction and after giving pro forma effect thereto, the Surviving
Person would be permitted to incur at least $1.00 of additional Indebtedness
pursuant to paragraph (a) of the covenant described under " -- Limitation on
Incurrence of Indebtedness" and (vi) the Company delivers to the Indenture
Trustee an Officers' Certificate (as defined in the Indenture) and an Opinion of
Counsel (as defined in the Indenture), each stating that such consolidation,
merger or transfer and such supplemental indenture, if any, complies with the
Indenture.
Ownership of the Trust
The Company shall continue (i) to directly or indirectly maintain 100%
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities and (ii) to use its reasonable
efforts to cause the Trust (x) to remain a statutory business trust, except in
connection with the distribution of Exchange Notes to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities, or certain mergers, consolidations or amalgamation, each as
permitted by the Declaration and (y) to otherwise continue to be classified for
United States federal income tax purposes as a grantor trust or another entity
which is not subject to United States federal income tax at the entity level and
the assets and income of which are treated for United States federal income tax
purposes as held and derived directly by holders of interests in the entity.
Change of Control
Upon the occurrence of a Change of Control Triggering event (as defined
herein), a holder of Trust Securities has the right to require the Trust to
exchange all or any part of the holder's Trust Securities for Senior
Subordinated Notes having an aggregate principal amount equal to the aggregate
Liquidation Amount of the Trust Securities so offered. Upon the occurrence of
such an event, the Company will be required to immediately redeem any Exchange
Notes so exchanged at a redemption price equal to 101% of the principal amount
thereof plus any accrued and unpaid interest.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Senior Subordinated Notes
pursuant to this covenant. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this covenant, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this covenant by virtue
thereof.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of the Exchange Preferred Securities to exchange the
Exchange Preferred Securities for Exchange Notes and their right to require the
Company to redeem the Exchange Notes could cause a default under such
indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the holders of Exchange Notes following the occurrence of
a Change of Control may be limited by the Company's then existing financial
resources. There can be no assurance that sufficient funds will be available
when necessary to make any required repurchases. The provisions under the
Indenture
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relative to the Company's obligation to make an offer to repurchase the Exchange
Notes as a result of a Change of Control may be waived or modified with the
written consent of the holders of a majority in principal amount of the Exchange
Notes.
Events of Default
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Exchange Notes: (i) failure for thirty days to pay interest
on the Exchange Notes when due or (ii) failure to pay principal of or premium,
if any, on the Exchange Notes when due, whether at maturity, upon redemption, by
judicial declaration or otherwise or (iii) failure to observe or perform any
other covenant contained in the Indenture for ninety days after notice as
provided in the Indenture or (iv) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any Subsidiary
(or the payment of which is guaranteed by the Company or any Subsidiary),
whether such Indebtedness or Guarantee now exists or is incurred after the Issue
Date, if (a) such default results in the acceleration of such Indebtedness prior
to its express maturity or shall constitute a default in the payment of such
Indebtedness and (b) the principal amount of any such Indebtedness that has been
accelerated or not paid at maturity, when added to the aggregate principal
amount of all other such Indebtedness, at such time, that has been accelerated
or not paid at maturity, exceeds $10 million or (v) the dissolution, winding up
or termination of the Trust, except in connection with the distribution of
Exchange Notes to the holders of Exchange Preferred Securities in liquidation of
the Trust and in connection with certain mergers, consolidations or amalgamation
permitted by the Declaration or (vi) certain events in bankruptcy, insolvency or
reorganization of the Company.
The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Exchange Notes may declare the principal of
and interest on the Exchange Notes due and payable immediately on the occurrence
of an Event of Default; provided, however, that, after such acceleration, but
before a judgment or decree based on acceleration, the holders of a majority in
aggregate principal amount of outstanding Exchange Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal, have been cured or waived as
provided in the Indenture. For information as to waiver of defaults, see " --
Modification of the Indenture."
The Preferred Trustee is the initial holder of the Exchange Notes.
However, while the Exchange Preferred Securities are outstanding, the Preferred
Trustee has agreed under the Indenture not to waive an Event of Default with
respect to the Exchange Notes without the consent of holders of a majority in
aggregate Liquidation Amount of the Exchange Preferred Securities then
outstanding.
A default under any other indebtedness of the Company or any of its
Subsidiaries or joint ventures or the Trust would not constitute an Event of
Default under the Exchange Notes.
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee in case an Event of Default shall occur and be continuing,
the Indenture Trustee will be under no obligation to exercise any of its rights
or powers under the Indenture at the request or direction of any holders of
Exchange Notes, unless such holders shall have offered to the Indenture Trustee
reasonable indemnity. Subject to such provisions for the indemnification of the
Indenture Trustee, the holders of a majority in aggregate principal amount of
the Exchange Notes then outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee, or exercising any trust or power conferred on the Indenture
Trustee.
No Holder of any Exchange Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Indenture Trustee written notice
of a continuing Event of Default and, if the Preferred Trustee is not the Holder
of Exchange Notes, unless the holders of at least 25% in aggregate principal
amount of the Exchange Notes then outstanding shall also have made written
request, and offered reasonable indemnity, to the Indenture Trustee to institute
such proceeding as Indenture Trustee, and the Indenture Trustee shall not have
received from the holders of a majority in aggregate principal amount of the
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outstanding Exchange Notes a direction inconsistent with such request and shall
have failed to institute such proceeding within sixty days. However, such
limitations do not apply to a suit instituted by a Holder of an Exchange Note
for enforcement of payment of the principal of and premium, if any, or interest
on such Exchange Notes on or after the respective due dates expressed in such
Exchange Note.
The holders of a majority in aggregate outstanding principal amount of
the Exchange Notes affected thereby may, on behalf of the holders of all the
Exchange Notes, waive any past default, except a default in the payment of
principal, premium, if any, or interest. The Company is required to file
annually with the Indenture Trustee and the Trustees a certificate as to whether
or not the Company is in compliance with all the conditions and covenants under
the Indenture.
Modification of the Indenture
The Indenture contains provisions permitting the Company and the
Indenture Trustee, with the consent of the holders of not less than a majority
in principal amount of the Exchange Notes, to modify the Indenture or any
supplemental indenture, provided that no such modification may, without the
consent of the Holder of each outstanding Exchange Note (or a majority in
Liquidation Amount of the Exchange Preferred Securities so long as they remain
outstanding) affected thereby, (i) extend the Stated Maturity of any Exchange
Note, or reduce the principal amount thereof, or reduce the rate or extend the
time of payment of interest thereon, except a otherwise stated herein, or reduce
any premium payable upon the redemption thereof, (ii) change the place or
currency of payment of principal of, or any premium or interest on, any Exchange
Note, (iii) impair the right to institute suit for the enforcement of any
payment on or with respect to any Exchange Note, (iv) modify the subordination
provisions in a manner advise to the holders of the Exchange Notes or (v) reduce
the percentage in principal amount of Exchange Notes the holders of which are
required to consent to any modification or amendment of the Indenture.
In addition, the Company and the Indenture Trustee may execute, without
the consent of any holder of Exchange Notes, any supplemental indenture to cure
any ambiguities, comply with the Trust Indenture Act and for certain other
customary purposes; provided that any such action does not materially adversely
affect the interest of the holders of the Exchange Notes (or the Exchange
Preferred Securities so long as they remain outstanding).
Governing Law
The Indenture and the Exchange Notes are governed by and construed in
accordance with, the laws of the State of New York.
Information Concerning the Indenture Trustee
The Indenture Trustee, prior to default, undertakes to perform only
such duties as are specifically set forth in the Indenture, and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Exchange Notes, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
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Certain Definitions
As used in the Indenture:
"Additional Assets" means (i) any property or asset (other than
Indebtedness and Capital Stock) in a Related Business, (ii) the Capital Stock of
a Person that becomes a Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Subsidiary or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a
Subsidiary; provided that any such Subsidiary described in clauses (ii) or (iii)
above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Company shall not be deemed to include the Trust. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under " -- Certain Covenants
- -- Limitation on Restricted Payments," " -- Certain Covenants -- Limitation on
Affiliate Transactions" and " -- Certain Covenants -- Limitations on Sales of
Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial
owner of Capital Stock representing 5% or more of the total voting power of the
Voting Stock (on a fully diluted basis) of the Company or of rights or warrants
to purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of any
Subsidiary (other than directors qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Subsidiary),
(ii) all or substantially all the assets of any division or line of business of
the Company or any Subsidiary or (iii) any other assets of the Company or any
Subsidiary outside of the ordinary course of business of the Company or such
Subsidiary (other than, in the case of (i), (ii) and (ii) above, (y) a
disposition by a Subsidiary to the Company or by the Company or a Subsidiary to
a Wholly Owned Subsidiary and (z) for purposes of the covenant described under "
- -- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"
only, a disposition that constitutes a Restricted Payment permitted by the
covenant described under " -- Certain Covenants -- Limitation on Sales of Assets
and Subsidiary Stock" only, a disposition that constitutes a Restricted Payment
permitted by the covenant described under " -- Certain Covenants -- Limitation
on Restricted Payments").
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means, with respect to the Company or a
Subsidiary, as the case may be, the Board of Directors (or other body performing
functions similar to any of those performed by a Board of Directors).
"Business Day" means any day other than (i) a Saturday or Sunday, (ii)
a day on which banking institutions in the City of New York are authorized or
required by law or executive order to remain closed or (iii) a day on which the
corporate trust office of the Indenture Trustee, or, with respect to the
Exchange Preferred Securities, the principal office of the Preferred Trustee
under the Declaration, is closed for business.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated
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Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participation or other equivalents of or
interests in (however designed) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means any transaction or series of transactions in
which any Person or group (within the meaning of Rule 13d-5 under the Exchange
Act and Section 13(d) and 14(d) of the Exchange Act) other than the Company and
its subsidiaries acquires all or substantially all of the Company's assets or
becomes the direct or indirect "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), by way of merger, consolidation, other business
combination or otherwise, of greater than 50% of the total voting power (on a
fully diluted basis as if all convertible securities had been converted and all
options and warrants had been exercised) entitled to vote in the election of
directors of the Company or the Surviving Person (if other than the Company).
"Change of Control Triggering Event" means a Change of Control.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date of such determination to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (1) if the Company or any Subsidiary has Incurred any Indebtedness since
the beginning of such period that remains outstanding or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is an
Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma basis to
such Indebtedness as if such Indebtedness had been Incurred on the first day of
such period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, (2) if since the
beginning of such period the Company or any Subsidiary shall have made any Asset
Disposition, the EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets which are the
subject of such Asset Disposition for such period, or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such period
and Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing Subsidiaries
in connection with such Asset Disposition for such period (or, if the Capital
Stock of any Subsidiary is sold, the Consolidated Interest Expense for such
period directly attributable to the Indebtedness of such Subsidiary to the
extent the Company and its continuing Subsidiaries are not longer liable for
such Indebtedness after such sale), (e) if since the beginning of such period
the Company or any Subsidiary (by merger or otherwise) shall have made an
Investment in any Subsidiary (or any person which becomes a Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such period and (4) if since the beginning of such period any Person (that
subsequently became a Subsidiary or was merged with or into the Company or any
Subsidiary since the beginning of such period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or a
Subsidiary during such period, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto as if such
Asset Disposition, Investment or acquisition occurred on the first day of such
period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting officer of
the Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest of such Indebtedness shall be calculated as
if the rate in effect on the
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date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of twelve months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Subsidiaries, plus, to the
extent not included in such total interest expense, and to the extent incurred
by the Company or its Subsidiaries, (i) interest expense attributable to capital
leases, (ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), (vii) Preferred Stock dividends in
respect of all Preferred Stock held by Persons other than the Company or a
Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments
in discontinued operations, (ix) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by the Company or any
Subsidiary and (x) the cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or trust
to pay interest or fees to any Person (other than the Company ) in connection
with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, the Company's equity in the net income
of any such person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to a
Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income, (ii) any net income (or
loss) of any Person acquired by the Company or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition,
(iii) any net income of any Subsidiary that is not a Wholly Owned Subsidiary if
such Subsidiary is subject to contractual, governmental or regulatory
restrictions, directly or indirectly, on owned of dividends or the making of
distributions by such Subsidiary, directly or indirectly, to the Company, except
that (A) subject to the exclusion contained in clause (iv) below, the Company's
equity in the net income of any such Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Subsidiary during such period to the Company or
another Subsidiary as a dividend or other distribution (subject, in the case of
a dividend or other distribution paid to another Subsidiary that is not a Wholly
Owned Subsidiary, to the limitation contained in this clause) and (b) the
Company's equity in a net loss of any such Subsidiary for such period shall be
included in determining such Consolidated Net Income, (iv) any gain (but not
loss) realized upon the sale or other disposition of any assets of the Company
or its consolidated Subsidiaries (including pursuant to any sale and leaseback
arrangement) that is not sold or otherwise disposed of in the ordinary course of
business and any gain (but not loss) realized upon the sale or other disposition
of any Capital Stock of any Person; (v) extraordinary gains or losses and (vi)
the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available prior to the taking of any action for the purpose of which the
determination is being made, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital surplus relating to such
Capital Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Credit Agreement" means the Revolving Credit Facility, among IGF
Insurance Company and Bretton Bank of Des Moines, Iowa dated February 25, 1993.
"Currency Agreement" means any foregoing currency exchange contract,
currency swap agreement or other similar agreement or arrangement designed and
entered into to protect the Company or any Subsidiary against fluctuations in
currency exchange rates.
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"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default (as defined herein).
"Disqualified Stock" means, with respect to any Person, any Capital
Stock that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Senior Subordinated Notes; provided, however, that any
Capital Stock that would constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Senior Subordinated Notes shall not constitute Disqualified Stock if the "asset
sale" or "change of control" provisions applicable to such Capital Stock are not
more favorable to the holders of such Capital Stock than the provisions
described under " -- Certain Covenants -- Limitation on Sale of Assets and
Subsidiary Stock" and " -- Change of Control."
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its Subsidiaries, (b) depreciation expense and (c) amortization
expense, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary that is not a Wholly Owned Subsidiary shall be
added to Consolidated Net Income to compute EBITDA only to the extent (and in
the same proportion) that the net income of such Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants (ii) statements and
pronouncements of the Financial Accounting Standards Board (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guaranty" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statements conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guaranty" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guaranty" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
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"Incur" means issue, assume, Guaranty, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall be deemed the Incurrence
of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable, (ii) all Capital
Lease Obligations of such Person, (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property or services, all conditional
sale obligations of such Person and all obligations of such Person under any
title retention agreement (other than (x) customary reservations or retentions
of title under agreements with suppliers entered into in the ordinary course of
business, (y) trade debt incurred in the ordinary course of business and due
within six months of the incurrence thereof and (z) obligations incurred under a
pension, retirement or deferred compensation program or arrangement regulated
under the Employee Retirement Income Security Act of 1974, as amended, or the
laws of a foreign government), (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, bank guaranty, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit and bank guaranties (A) not made under the Credit Agreement
and (B) securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit), (v) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any subsidiary of such Person, any Preferred Stock
(but excluding, in each case, any accrued dividends), (vi) all obligations of
the type referred to in clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guaranty, (vii) all obligations of the type
referred to in clauses (i) through (vi) of other Persons secured by any Lien on
any property or asset of such Person (whether or not such obligation is assumed
by such Person), the amount of such obligation being deemed to be the lesser of
the value of such property or assets or the amounts of the obligation so secured
and (viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
and entered into to protect the Company or any Subsidiary against fluctuations
in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extensions of credit (including by way of Guaranty or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase of acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person.
"Investment Grade" means a rating of BBB- or higher by S&P and Baa3 or
higher by Moody's and the equivalent in respect of Rating Categories of any
Rating Agency substituted for S&P or Moody's.
"Issue Date" means the date on which the Old Senior Subordinated Notes
were originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
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"Marketable Securities" means securities listed on a national
securities exchange which have a minimum weekly trading volume of at least
100,000 shares.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
non-cash form) in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed in such Asset Disposition and retained by the
Company or any Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Permitted Investment" means an Investment by the Company or any
Subsidiary in (i) a Person that will, upon the making of such Investment, be or
become a Subsidiary; provided, however, that the primary business of such
Subsidiary is a Related Business, (ii) a Person if a result of such Investment
such other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or a Subsidiary;
provided, however, that such Person's primary business is a Related Business,
(iii) Temporary Cash Investments, (iv) any demand deposit account with an
Approved Lender, (v) receivables owing to the Company or any Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as the Company or
any such Subsidiary deems reasonable under the circumstances, (vi) payroll,
travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business, (vii) loans or advances to
employees made in the ordinary course of business consistent with past practices
of the Company or such Subsidiary, (viii) stock, obligations or securities
received in settlement of debts created in the ordinary course of business and
owing to the Company or any Subsidiary, or in satisfaction of judgments, (ix)
any Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to the
covenant described under " -- Certain Covenants -- Limitation on Sales of Assets
and Subsidiary Stock" and (x) any Affiliate (the primary business of which is a
Related Business) that is not a Subsidiary (other than the Company); provided,
that the aggregate of all such Investments outstanding at any one time under
this clause (x) shall not exceed $1 million.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency, instrumentality or political subdivision thereof, or any other
entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
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"Principal" of a Senior Subordinated Note means the principal of the
Senior Subordinated Note plus the premium, if any, payable on the Senior
Subordinated Note which is due or overdue or is to become due at the relevant
time.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Subsidiary existing on the Issue Date or
Incurred in compliance with the Indenture including Indebtedness that Refinances
Refinancing Indebtedness; provided, however, that (i) such Refinancing
Indebtedness has a Stated Maturity no earlier that the Stated Maturity of the
Indebtedness being Refinanced, (ii) such Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being Refinanced and (iii)
such Refinancing Indebtedness has an aggregate principal amount (or if Incurred
with original issue discount, an aggregate issue price) that is equal to or less
than the aggregate principal amount (or if Incurred with original issue
discount, the aggregate accreted value) then outstanding or committed (plus fees
and expenses, including any premium and defeasance costs) under the Indebtedness
being Refinanced; provided further, however, that Refinancing Indebtedness shall
not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Subsidiary that Refinances
Indebtedness of another Subsidiary.
"Related Business" means the business of providing property and
casualty insurance to individuals or farms and any business related, ancillary
or complementary to such business of the Company.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock)) and
dividends or distributions payable solely to the Company or a Subsidiary, and
other than pro rata dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Subsidiary held by any Affiliate of the Company (other than a
Subsidiary), including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company that is not Disqualified Stock),
(iii) the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of acquisition),
or (iv) the making of any Investment in any Person (other than a Permitted
Investment).
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by
a Lien.
"Senior Indebtedness" means, with respect to the Company, (i)
Indebtedness of such Person, whether outstanding on the Issue Date or thereafter
incurred and (ii) accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
such Person, whether or not the claim for such interest is allowed as a claim
after such filing) in respect of (A) any Indebtedness of such Person under the
Credit Agreement, (B) Indebtedness of such Person for money borrowed and (c)
Indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinate in right of
payment to the Exchange Notes; provided, however, that Senior Indebtedness
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shall not include (1) any obligation of such Person to any subsidiary of such
Person, (2) any liability for federal, state, local or other taxes owed or owing
by such Person, (3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (4) any Indebtedness of such Person
(and any accrued and unpaid interest in respect thereof) which is subordinate or
junior in any respect to any other Indebtedness or other obligation of such
Person or (5) that portion of any Indebtedness which at the time of incurrence
is incurred in violation of the Indenture.
"Senior Subordinated Indebtedness" means the Exchange Notes and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Exchange Notes in right of payment
and is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company that is not Senior Indebtedness.
"S&P" means Standard & Poor's Corporation and its successors.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Senior Subordinated Notes
pursuant to a written agreement to that effect.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company or by one or more Subsidiaries, or by the
Company and one or more Subsidiaries.
"Surviving Person" means, with respect to any Person involved in any
merger, consolidation or other business combination or the sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
such Person's assets, the Person formed by or surviving such transaction or the
Person to which such disposition is made.
"Temporary Cash Investments" means any of the following: (a) securities
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full faith,
and credit of the United States of America is pledged in support thereof), (b)
time deposits and certificates of deposit, Eurodollar time deposits and
Eurodollar certificates of deposit of (i) any lender under the Credit Agreement
or (ii) any United States commercial bank of recognized standing (y) having
capital and surplus in excess of $500 million and (z) whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof (any such bank being an
"Approved Lender"), in each case with maturities of not more than 270 days from
the date of acquisition, (c) commercial paper and variable or fixed rate notes
issued by an Approved Lender (or by the parent company thereof) and maturing
within six months of the date of acquisition, (d) repurchase agreements entered
into by a Person with a bank or trust company (including any of the lenders
under the Credit Agreement) or recognized securities dealer having capital and
surplus in excess of $500,000,000 for (i) direct obligations issued or fully
guaranteed by the United States of America, (ii) time deposits or certificates
of deposit described under subsection (b) above or (iii) commercial paper or
other notes described under subsection (c) above, in which, in each such case,
such bank, trust company or dealer shall have a perfected first priority
security interest (subject to no other Liens) and having, on the date of
purchase thereof, a fair market value of at least 100% of the amount of the
repurchase obligations, (e) obligations of any State of the United States or any
political subdivision thereof, the interest with respect to which is exempt from
federal income taxation under Section 103 of the United States Internal Revenue
Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's,
respectively, and maturing within three years from the date of acquisition
thereof, (f) Investments in municipal auction
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preferred stock (i) rated AAA (or the equivalent thereof) or better by S&P or
Aaa (or the equivalent thereof) or better by Moody's and (ii) with dividends
that reset at least once every 365 days and (g) Investments, classified in
accordance with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, in each case
which are administered by reputable financial institutions having capital of at
least $100,000,000 and the portfolios of which are limited to Investments of the
character described in clauses (a), (b), (c), (e) and (f) above.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock
(other than director's qualifying shares and shares held by other Persons, to
the extent such shares are required by applicable law to be held by a Person
other than the Company or a Subsidiary) of which is owned by the Company or by
one or more Wholly Owned Subsidiaries, or by the Company and one or more Wholly
Owned Subsidiaries.
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DESCRIPTION OF EXCHANGE GUARANTEE
The Exchange Guarantee was executed and delivered by the Company
concurrently with the issuance by the Trust of the Exchange Preferred Securities
for the benefit of the holders from time to time of the Exchange Preferred
Securities. As soon as practicable after the date hereof, the Company Guarantee
will be exchanged by the Company for the Exchange Guarantee for the benefit of
the holders from time to time of the Exchange Preferred Securities. The Exchange
Guarantee has been qualified under the Trust Indenture Act. This summary of
certain provisions of the Exchange Guarantee does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all of the
provisions of the Exchange Guarantee, including the definitions therein of
certain terms, and the Trust Indenture Act. The Guarantee Trustee will hold the
Exchange Guarantee for the benefit of the holders of the Exchange Preferred
Securities.
General
Pursuant to the Exchange Guarantee, the Company will irrevocably and
unconditionally agree to pay in full on a senior subordinated basis, to the
extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Exchange Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert,
other than the defense of payment. The following payments or distributions with
respect to the Exchange Preferred Securities, (the "Guarantee Payments"), will
be subject to the Exchange Guarantee (without duplication): (i) any accrued and
unpaid Distributions that are required to be paid on the Exchange Preferred
Securities, to the extent the Trust has funds legally available therefor, (ii)
the Redemption Price with respect to the Exchange Preferred Securities called
for redemption, to the extent the Trust has funds legally available therefor and
(iii) upon a voluntary or involuntary dissolution, winding up or liquidation of
the Trust (other than in connection with a Distribution of the Exchange Notes to
holders of Exchange Preferred Securities or redemption of all the Exchange
Preferred Securities), the less of (a) the aggregate of the Liquidation Amount
and all accrued and unpaid distributions on the Exchange Preferred Securities to
the date of payment, to the extent the Trust has funds legally available
therefor and (b) the amount of cash assets of the Trust remaining legally
available for distribution to holders of the Exchange Preferred Securities upon
the liquidation of the Trust. If the Company does not make interest payments on
the Exchange Notes held by the Trust, the Trust will not be able to pay
Distributions on the Exchange Preferred Securities and will not have funds
legally available therefor.
The Exchange Guarantee will be an irrevocable and unconditional
guarantee on a senior subordinated basis of the Trust's obligations under the
Exchange Preferred Securities, but will apply only to the extent that the Trust
has funds sufficient to make such payments and is not a guarantee of collection.
The Exchange Guarantee will rank subordinate and junior in right of payment to
all Senior Indebtedness of the Company. See " -- Status of the Exchange
Guarantee."
Almost all of the assets of the Company consist of stock of the
Subsidiaries. Accordingly, the Company relies primarily on dividends and fees
from such Subsidiaries to meet its obligations for payment of principal and
interest on its outstanding debt obligations and corporate expenses. The
inability of the Company's direct and indirect Subsidiaries to pay dividends to
the Company in an amount sufficient to meet debt service obligations and pay
operating expenses would have a material adverse effect on the Company and the
Trust. The payment of dividends by the Company's Subsidiaries without prior
regulatory approval is subject to restrictions set forth in the insurance laws
and regulations of Indiana and Florida, the states of domicile of the Company's
Insurance Subsidiaries. The Company currently does not expect such regulatory
requirements to impair its ability to meet interest payment obligations and to
pay operating expenses in the future. However, the Company can give no assurance
that dividends will be declared or paid by its Subsidiaries. In addition,
payment of dividends to the Company by the Insurance Subsidiaries is subject to
ongoing review by insurance regulators and is subject to various statutory
limitations and in certain circumstances requires approval by insurance
regulatory authorities. The right of the Company to participate in any
distribution of assets of any Subsidiary upon such Subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of the
Subsidiary, except to the extent the Company may itself be recognized as a
creditor of that Subsidiary. Accordingly, the Exchange Notes will be effectively
subordinated to all existing and future liabilities of the Company's
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Subsidiaries, and holders of Exchange Notes should look only to the assets of
the Company for payments on the Exchange Notes. Accordingly, the Company's
obligations under the Exchange Guarantee, as well as its obligation to pay
interest and principal on the Exchange Notes, will be effectively subordinated
to all existing and future liabilities of the Company's Subsidiaries. See "Risk
Factors -- Holding Company Structure; Dividend and Other Restrictions;
Management Fees." As of June 30, 1997, the liabilities of the Company's
Subsidiaries were approximately $469 million.
The Company has, through the Exchange Guarantee, the Declaration, the
Exchange Notes and the Indenture, taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust's obligations under the Exchange
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Exchange Preferred Securities. See "Relationship
Among the Exchange Preferred Securities, the Declaration, the Exchange Notes and
the Exchange Guarantee."
The Company has also agreed separately to irrevocably and
unconditionally guarantee the obligations of the Trust with respect to the
Common Securities to the same extent as the Exchange Guarantee, except that upon
the occurrence and during the continuation of a Indenture Event of Default,
holders of Exchange Preferred Securities shall have priority over holders of
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
Status of the Exchange Guarantee
The Exchange Guarantee will constitute an unsecured senior subordinated
obligation of the Company and will rank subordinate and junior in right of
payment to all Senior Indebtedness of the Company as defined under "Description
of the Exchange Notes -- Certain Definitions." The Exchange Guarantee will
constitute a guarantee of payment and not of collection (i.e., the guaranteed
party may institute a legal proceeding directly against the Company to enforce
its rights under the Exchange Guarantee without first instituting a legal
proceeding against any other person or entity). The Exchange Guarantee will be
held for the benefit of the holders of the Exchange Preferred Securities. The
Exchange Guarantee will not be discharged except by payment of the Guarantee
Payments in full to the extent not paid by the Trust out of funds legally
available therefor or upon distribution of the Exchange Notes to the holders of
the Exchange Preferred Securities. The Exchange Guarantee does not place a
limitation on the amount of additional Senior Indebtedness that may be incurred
by the Company. However, the ability of the Company and its Subsidiaries to
incur indebtedness is restricted under the Exchange Notes. The Company expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness. See "Description of the Exchange Notes -- Certain Covenants."
The Company may not make a Guarantee Payment to holders of Exchange
Preferred Securities if (i) the Specified Senior Indebtedness is not paid when
due or (ii) any other default on Specified Senior Indebtedness of the Company
occurs and the maturity of such Specified Senior Indebtedness is accelerated in
accordance with its terms, unless, in either case, the default has been cured or
waived and any such acceleration has been rescinded or such Specified Senior
Indebtedness has been paid in full. The failure to make a payment under the
Exchange Guarantee shall not be considered an Event of Default. However, the
Company may make a Guarantee Payment without regard to the foregoing if the
Company and the Guarantee Trustee receive written notice approving such payment
from a representative of the Specified Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Specified Senior Indebtedness of the
Company pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company may
not make a Guarantee Payment to holders of Preferred Securities for a period (a
"Payment Blockage Period") commencing upon the receipt by the Guarantee Trustee
(with a copy to the Company) of written notice (a "Blockage Notice") of such
default from the representative of the holders of such Specified Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if
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such Payment Blockage Period is terminated (i) by written notice to the
Guarantee Trustee and the Company from the representative of the holders of such
specified Senior Indebtedness, (ii) because the default giving rise to such
Blockage Notice is no longer continuing or (iii) because such Specified Senior
Indebtedness has been repaid in full). Notwithstanding the provisions described
in the immediately preceding sentence, unless the holders of such Specified
Senior Indebtedness or the representative of such holders have accelerated the
maturity of such Specified Senior Indebtedness, the Company may resume Guarantee
Payments after the end of such Payment Blockage Period. The Exchange Guarantee
shall not be subject to more than one Payment Blockage Period in any consecutive
360-day period, irrespective of the number of defaults with respect to Specified
Senior Indebtedness during such period.
Upon any payment or distribution of the assets of the Company upon a
total or partial liquidation or dissolution or reorganization of or similar
proceeding relating to the Company or its property, the holders of Senior
Indebtedness of the Company will be entitled to receive payment in full of such
Senior Indebtedness before the holders of Exchange Preferred Securities are
entitled to receive any Guarantee Payment, and until the Senior Indebtedness of
the Company is paid in full, any payment or Distribution to which holders of
Exchange Preferred Securities would be entitled but for the subordination
provisions of the Exchange Guarantee will be made to holders of such Senior
Indebtedness as their interests may appear. If a Distribution is made to holders
of Exchange Preferred Securities, that, due to the subordination provisions,
should not have been made to them, such holders are required to hold it in trust
for the holders of Senior Indebtedness of the Company and pay it over to them as
their interests may appear.
If a Guarantee Payment is to be made by the Company to holders of
Exchange Preferred Securities, the Company or the Guarantee Trustee shall
promptly notify the holders of Senior Indebtedness of the Company or the
representative of such holders of such Guarantee Payment. If any Senior
Indebtedness of the Company is outstanding, the Company may not pay such
Guarantee Payment until five Business Days after the representatives of all the
issues of Senior Indebtedness of the Company receive notice of such Guarantee
Payment and, thereafter, may pay such Guarantee Payment only if the Exchange
Guarantee otherwise permits payment at that time.
Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Exchange Preferred Securities (in which case
no vote will be required), the Exchange Guarantee may not be amended without the
prior approval of the holders of not less than a majority in aggregate
Liquidation Amount of the outstanding Exchange Preferred Securities. The manner
of obtaining any such approval will be as set forth under "Description of the
Exchange Preferred Securities -- Voting Rights." All guarantees and agreements
contained in the Exchange Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Exchange Preferred Securities then outstanding.
The Exchange Guarantee shall not be amended without the prior receipt by the
Company of an opinion of independent tax counsel to the effect that such
amendment of the Exchange Guarantee will not result in the recognition of
income, gain or loss by holders of the Exchange Preferred Securities.
Events of Default
An event of default under the Exchange Guarantee will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Exchange Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Exchange Guarantee or to direct the exercise
of any trust or power conferred upon the Guarantee Trustee under the Exchange
Guarantee.
Upon the occurrence of a payment default under the Exchange Guarantee,
any holder of the Exchange Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Exchange Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other persons or entity.
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The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether the Company is in compliance with
all the conditions and covenants applicable to it under the Exchange Guarantee.
Termination of the Exchange Guarantee
The Exchange Guarantee will terminate and be of no further force and
effect upon full payment of the Redemption Price of the Exchange Preferred
Securities, upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Trust or upon distribution of Exchange Notes
to the holders in exchange for all of the Exchange Preferred Securities. The
Exchange Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of the Exchange Preferred Securities must
restore payment of any sums paid under such Exchange Preferred Securities or
such Exchange Guarantee.
Governing Law
The Exchange Guarantee will be governed by and construed in accordance
with the laws of the State of New York.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of the Exchange Guarantee, undertakes
to perform only such duties as are specifically set forth in the Exchange
Guarantee and, after default with respect to the Exchange Guarantee, must
exercise the same degree of care and skill as a prudent person would exercise or
use in the conduct of his or her own affairs. Subject to this provision, the
Guarantee Trustee is under no obligation to exercise any of the powers vested in
it by the Exchange Guarantee at the request of any holder of the Exchange
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
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RELATIONSHIP AMONG THE EXCHANGE PREFERRED SECURITIES,
THE DECLARATION, THE EXCHANGE NOTES
AND THE EXCHANGE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Exchange
Preferred Securities (to the extent the Trust has funds legally available for
the payment of such Distributions) are irrevocably guaranteed by the Company as
and to the extent set forth under "Description of the Exchange Guarantee." Taken
together, the Company's obligations under the Exchange Notes, the Indenture, the
Declaration and the Exchange Guarantee provide, in effect, a full, irrevocable
and unconditional guarantee of payments of Distributions and other amounts due
on the Exchange Preferred Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Exchange Preferred Securities. If and to the
extent that the Company does not make payments on the Exchange Notes, the Trust
will not pay Distributions or other amounts due on its Exchange Preferred
Securities. The Exchange Guarantee does not cover payment of Distributions when
the Trust does not have sufficient funds legally available to pay such
Distributions. In such event, the remedy of a holder of an Exchange Preferred
Security is to institute a legal proceeding directly against the Company on
behalf of the Trust for enforcement of the Company's obligations on the Exchange
Notes. The obligations of the Company under the Exchange Guarantee are
subordinate and junior in right of payment to all Senior Indebtedness of the
Company.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the Exchange Notes, such payments will be sufficient to cover Distributions and
other payments due on the Exchange Preferred Securities, primarily because (i)
the aggregate principal amount of the Exchange Notes will be equal to the sum of
the aggregate stated Liquidation Amount of the Exchange Preferred Securities and
Common Securities, (ii) the interest rate and interest and other payment dates
on the Exchange Notes will match the distribution rate and distribution and
other payment dates for the Exchange Preferred Securities, (iii) the Indenture
provides that the Company shall pay, and the Trust shall not be obligated to
pay, directly or indirectly, all and any costs, expenses and liabilities of such
Trust except the Trust's obligations to holders of its Exchange Preferred
Securities under such Exchange Preferred Securities and (iv) the Declaration
further provides that the Trust will not engage in any activity that is not
consistent with the limited purposes of such Trust.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Exchange Guarantee.
Enforcement Rights of Holders of Exchange Preferred Securities
If a Declaration Event of Default has occurred and is continuing and is
attributable to the failure of the Company to make payments on the Exchange
Notes, then holders of not less than 25% in Liquidation Amount of outstanding
Exchange Preferred Securities have the right to appoint a trustee (the "Special
Trustee") to act on behalf of all holders of Exchange Preferred Securities. The
Special Trustee appointed in accordance with the preceding sentence will
represent the holders of all outstanding Exchange Preferred Securities unless
the holders of at least a majority in Liquidation Amount of the outstanding
Exchange Preferred Securities appoint an alternative Special Trustee in which
case the Special Trustee appointed in accordance with the preceding sentence
will be required to resign as Special Trustee. At no time can there be more than
one Special Trustee acting on behalf of the holders of Exchange Preferred
Securities. The Special Trustee will have the right to directly institute a
proceeding (a "Trustee Action") for enforcement of payment to the holders of
Exchange Preferred Securities of the principal of or interest on the Exchange
Notes having a principal amount equal to the aggregate Liquidation Amount of the
Exchange Preferred Securities outstanding on or after the respective due date
specified in the Exchange Notes. The holders of the Exchange Preferred
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Securities would not be able to exercise directly any other remedies available
to the holders of the Exchange Notes unless the Preferred Trustee or the Special
Trustee, acting for the benefit of the Preferred Trustee, fails to do so. In
such event, the holders of at least 25% in aggregate Liquidation Amount of
outstanding Exchange Preferred Securities would have a right to institute such
proceedings. In addition, if the Company fails to make interest or other
payments on the Senior Subordinated Notes when due, the Indenture provides that
a holder of Exchange Preferred Securities may institute legal proceeding
directly against the Company to enforce the Preferred Trustee's rights under the
Exchange Notes without first instituting a legal proceeding against the
Preferred Trustee, the Trust or any other person or entity. See "Description of
the Exchange Preferred Securities -- Voting Rights."
If the Company fails to make a payment under the Exchange Guarantee, a
holder of a Preferred Security may institute a legal proceeding directly against
the Company to enforce its rights under the Exchange Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity. If the Company fails to make payments in respect of the
Trust's costs and expenses as required by the Indenture, a creditor of the Trust
may institute a legal proceeding directly against the Company to enforce such
payments.
In the event of payment defaults under, or acceleration of, Senior
Indebtedness of the Company, the subordination provisions of the Indenture
provide that no payments may be made in respect of the Exchange Notes until such
Senior Indebtedness has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on the Exchange Notes
would constitute an Event of Default.
Limited Purpose of the Trust
The Trust's Exchange Preferred Securities evidence a beneficial
ownership interest in such Trust, and the Trust exists for the sole purpose of
issuing its Exchange Preferred Securities and Common Securities and investing
the proceeds thereof in the Exchange Notes. A principal difference between the
rights of a holder of an Exchange Preferred Security and a holder of an Exchange
Note is that a holder of an Exchange Note is entitled to receive from the
Company the principal amount of and interest accrued on Exchange Notes held,
while a holder of Exchange Preferred Securities is entitled to receive
distributions from the Trust (or from the Company under the applicable Company
Guarantee) if and to the extent the Trust has funds available for the payment of
such distributions.
Rights Upon Dissolution
Upon any voluntary or involuntary dissolution, winding-up or
liquidation of any Trust involving the liquidation of the Exchange Notes after
satisfaction of liabilities to creditors of the Trust, the holders of the
Preferred Securities will be entitled to receive, out of assets held by such
Trust, the Liquidation Distribution in cash. See "Description of the Exchange
Preferred Securities -- Liquidation Distribution Upon Dissolution." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the Preferred
Trustee, as holder of the Exchange Notes, would be a subordinated creditor of
the Company, subordinated in right of payment to all Senior Indebtedness, but
entitled to receive payment in full of principal and interest, before any
stockholders of the Company receive payments or distributions. Since the Company
is the guarantor under the Exchange Guarantee and has agreed to pay for all
costs, expenses and liabilities of the Trust (other than the Trust's obligations
to the holders of its Exchange Preferred Securities), the positions of a holder
of the Exchange Preferred Securities and a holder of the Exchange Notes relative
to other creditors and to stockholders of the Company in the event of
liquidation or bankruptcy of the Company are expected to be substantially the
same.
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DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are identical in all material respects
to the Exchange Securities, except that (i) the Old Securities have not been
registered under the Securities Act and are entitled to certain rights under the
Registration Rights Agreement (which rights will terminate upon consummation of
the Exchange Offer, except under limited circumstances), (ii) the Exchange
Preferred Securities will not contain the $100,000 minimum Liquidation Amount
transfer restriction and certain other restrictions on transfer applicable to
the Preferred Securities, (iii) the Exchange Preferred Securities will not
provide for any increase in the Distribution rate thereon, (iv) the Exchange
Notes will not contain the $100,000 minimum principal amount transfer
restriction and (v) the Exchange Notes will not provide for any increase in the
interest rate thereon. The Preferred Securities provide that, in the event that
a registration statement relating to the Exchange Offer has not been filed by
September 30, 1997 and declared effective by February 9, 1998, or, in certain
limited circumstances, in the event a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Preferred Securities
is not declared effective by February 9, 1998, then interest will accrue (in
addition to the stated interest rate on the Old Senior Subordinated Notes) at
the rate of 0.25% per annum on the principal amount of the Old Senior
Subordinated Notes and Distributions will accrue (in addition to the stated
Distribution rate on the Preferred Securities) at the rate of 0.25% per annum on
the Liquidation Amount of the Preferred Securities, for the period from the
occurrence of such event until such time as such required Exchange Offer is
consummated or any required Shelf Registration Statement is effective. The
Exchange Securities are not, and upon consummation of the Exchange Offer the
Preferred Securities will not be, entitled to any such additional interest or
Distributions. Accordingly, holders of Preferred Securities should review the
information set forth under "Risk Factors -- Consequences of a Failure to
Exchange Preferred Securities" and "Description of Exchange Preferred
Securities."
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal
income tax considerations of the purchase, ownership and disposition of the
Exchange Preferred Securities held as capital assets by a Holder. Unless
otherwise stated, this summary only addresses the tax consequences to a Holder
that acquired Preferred Securities upon original issuance at their original
issue price. As used herein, a "United States Person" means (i) a person that is
a citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) any trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
fiduciaries have the authority to control all the substantial decisions of such
trust. The tax treatment of a holder may vary depending on such holder's
particular situation. This summary does not address all the tax consequences
that may be relevant to a particular holder or to holders who may be subject to
special tax treatment, such as banks, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
or tax-exempt investors. In addition, this summary does not include any
description of any alternative minimum tax consequences or the tax laws of any
state, local or foreign government that may be applicable to a holder of
Preferred Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury regulations promulgated thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis. The
authorities on which this summary is based are subject to various
interpretations and the opinions of Tax Counsel are not binding on the Internal
Revenue Service ("IRS") or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought by the Company from
the IRS with respect to the transactions described herein. Accordingly, there
can be no assurance that the IRS will not challenge the opinions expressed
herein or that a court would not sustain such a challenge. Nevertheless, Tax
Counsel has advised that it is of the view that, if challenged, the opinions
expressed herein would be sustained by a court with jurisdiction in a properly
presented case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE EXCHANGE
PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS SEE "DESCRIPTION
OF THE EXCHANGE PREFERRED SECURITIES - TAX EVENT OR INVESTMENT COMPANY EVENT
REDEMPTION OR DISTRIBUTION."
Exchange of Securities
The exchange of Preferred Securities for Exchange Preferred Securities
will not be a taxable event to holder for United States federal income tax
purposes. Under applicable Treasury Regulations, the exchange of Preferred
Securities for Exchange Preferred Securities pursuant to the Exchange Offer will
not be treated as an "exchange" for United States federal income tax purposes.
Accordingly, the Exchange Preferred Securities will have the same issue price as
the Preferred Securities, and a holder will have the same adjusted tax basis and
holding period in the Exchange Preferred Securities as the holder had in the
Preferred Securities immediately before the exchange.
Classification of the Trust
In connection with the issuance of the Exchange Preferred Securities,
Dann Pecar Newman & Kleiman, P.C. ("Tax Counsel") will render its opinion that
under current law and assuming full compliance with the terms of the Indenture,
the Trust will be classified as a grantor trust for United States federal income
tax purposes and not as an association taxable as a corporation. Accordingly,
for United Stated federal income tax purposes, each beneficial owner of
Preferred Securities generally will be considered the owner of an undivided
interest in the Exchange Notes and, thus,
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will be required to include in its gross income its pro rata share of the
interest income or original issue discount ("OID") that is paid or accrued on
the Exchange Notes. See " -- Interest Income and Original Issue Discount."
Classification of the Exchange Notes
The Company, the Trust and the holders of the Preferred Securities (by
acceptance of a beneficial ownership interest in a Security) will agree to treat
the Exchange Notes as indebtedness for all United States tax purposes.
Accordingly, the Company intends to take the position that the Exchange Notes
will be classified as indebtedness for United States federal income tax
purposes. The following discussion assumes that the Exchange Notes will be
classified as indebtedness for such purposes.
Interest Income and Original Issue Discount
Because the Company has the right to defer the payment of stated
interest on the Exchange Notes, the stated interest on the Exchange Notes will
be considered to be original issue discount ("OID") (within the meaning of
Section 1273(a) of the Code). Consequently, holders must include such stated
interest in gross income on a daily economic accrual basis (using the
constant-yield-to-maturity method of accrual described in Section 1272 of the
Code, regardless of their regular method of tax accounting and in advance of
receipt of the cash attributable to such income. The application of these OID
accrual rules may accelerate the timing of a holder's recognition of such income
in certain situations. Actual payments of stated interest on the Exchange Notes,
however, will not be separately reported as taxable income. Any amount of OID
included in a holder's gross income with respect to an Exchange Preferred
Security will increase such holder's adjusted tax basis in such Exchange
Preferred Security, and the amount of Distributions received by a holder in
respect of such OID will reduce such holder's adjusted tax basis in such
Exchange Preferred Security.
Corporate holders of Exchange Preferred Securities will not be entitled
to a dividends-received deduction with respect to any income recognized by such
holders with respect to the Exchange Preferred Securities.
Distribution of Notes or Cash upon Liquidation of the Trust
As described under the caption "Description of Exchange Preferred
Securities -- Liquidation Distribution Upon Dissolution," Exchange Notes may be
distributed to holders in exchange for the Exchange Preferred Securities and in
liquidation of the Trust. Under current law, such a distribution would be
non-taxable, and will result in the holder receiving directly its pro rata share
of the Exchange Notes previously held indirectly through the Trust, with a
holding period and aggregate tax basis equal to the holder period and aggregate
tax basis such holder had in its Exchange Preferred Securities before such
distribution. If, however, the liquidation of the Trust were to occur because
the Trust is subject to United States federal income tax with respect to income
accrued or received on the Exchange Notes, the distribution of the Exchange
Notes to holders would be a taxable event to the Trust and to each holder and a
holder would recognize gain or loss as if the holder had exchanged its Exchange
Preferred Securities for the Exchange Notes it received upon liquidation of the
Trust.
A holder would accrue interest in respect of the Exchange Notes
received from the Trust in the manner described above under " -- Interest Income
and Original Issue Discount."
Under certain circumstances described herein (see "Description of
Exchange Preferred Securities -- Redemption"), the Exchange Notes may be
redeemed for cash, with the proceeds of such redemption distributed to holders
in redemption of their Exchange Preferred Securities. Under current law, such a
redemption would constitute a taxable disposition of the redeemed Exchange
Preferred Securities for United States federal income tax purposes, and a holder
would recognize gain or loss as if it sold such redeemed Exchange Preferred
Securities for cash. See " -- Resales of Exchange Preferred Securities."
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Sales of Exchange Preferred Securities
A holder that sells Exchange Preferred Securities will recognize gain
or loss equal to the difference between the amount realized by the holder on the
sale or redemption of the Exchange Preferred Securities (except to the extent
that such amount realized is characterized as a payment in respect of accrued
but unpaid interest on such holder's allocable share of the Exchange Notes that
such holder has not included in gross income previously) and the holder's
adjusted tax basis in the Exchange Preferred Securities sold or redeemed. Such
gain or loss generally will be a capital gain or loss and generally will be a
long-term capital gain or loss if the Exchange Preferred Securities have been
held for more than one year. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United Stated federal
income tax purposes.
A holder will be required to add any accrued and unpaid OID to its
adjusted tax basis for its Exchange Preferred Securities. To the extent the
selling price of such holder's Exchange Preferred Securities is less than the
adjusted tax basis (which will include any accrued and unpaid OID) a holder will
recognize a capital loss.
Possible Tax Law Changes
The United States Congress has recently passed and the President
approved certain changes to United States federal income tax law. While
President Clinton proposed as part of the legislation a denial to an issuer of
an interest deduction, for United States federal income tax purposes, on
instruments such as the Senior Subordinated Notes, the law does not include any
such provision. There can be no assurance, however, that future legislation will
not adversely affect the ability of the Company to deduct interest on the Senior
Subordinated Notes or otherwise affect the tax treatment of the transactions
described herein. Moreover, such legislation could give rise to a Tax Event
which would permit the Company to distribute the Senior Subordinated Notes to
the holders of the Preferred Securities or cause a redemption of the Preferred
Securities as described more fully under "Description of the Exchange Notes" and
"Description of the Exchange Preferred Securities." See also "Certain United
States Federal Income Tax Considerations -- Possible Tax Law Changes."
Non-United States Holders
As used herein, the term "Non-United States Holder" means any person
that is not a United States Person (as defined above). As discussed above, the
Exchange Preferred Securities will be treated as evidence of an indirect
beneficial ownership interest in the Exchange Notes. See " -- Classification of
the Trust." Thus, under present United States federal income tax law, and
subject to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any paying agent or
principal or interest (which for purposes of this discussion includes any
OID) with respect to the Preferred Securities (or on the Senior
subordinated Notes) to a Non-United States Holder; provided (i) that the
beneficial owner of the Preferred Securities (or Senior Subordinated Notes)
("Beneficial Owner") does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote within the meaning of section 871(h)(3) of the Code and
the regulations thereunder, (ii) the Beneficial Owner is not a controlled
foreign corporation that is related to the Company through stock ownership,
(iii) the Beneficial Owner is not a bank whose receipt of interest with
respect to the Exchange Preferred Securities (or on the Exchange Notes as
described in section 881(c)(3)(A) of the Code) and (iv) the Beneficial
Owner satisfies the statement requirement (described generally below) set
forth in section 871(h) and section 881(c) of the Code and the regulations
thereunder, and
(b) no withholding of United States federal income tax will be
required with respect to any gain realized by a Non-Untied States Holder
upon the sale or other disposition of the Exchange Preferred Securities (or
the Exchange Notes).
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To satisfy the requirement referred to in (a)(iv) above, the Beneficial
Owner, or a financial institution holding the Exchange Preferred Securities (or
the Exchange Notes on behalf of such owner, must provide, in accordance with
specified procedures, to the Trust or any paying agent (a "Paying Agent"), a
statement to the effect that the Beneficial Owner is not a United States Holder.
Pursuant to current temporary Treasury regulations, these requirements will be
met if (1) the Beneficial Owner provides his name and address, and certifies,
under penalties of perjury, that it is not a United States person (which
certification may be made on an IRS Form W-8 (or successor form)) or (2) a
financial institution holder the Exchange Preferred Securities (or the Senior
Subordinated Notes) on behalf of the Beneficial Owner certifies, under penalties
of perjury, that such statement has been received by it and furnishes a paying
agent with a copy thereof.
If a Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in (a) above, payments of premium, if
any, and interest (including any OID) made to such Non-United States Holder will
be subject to a 30% withholding tax unless the Beneficial Owner provides the
Company or the relevant Paying Agent, as the case may be, with a properly
executed (1) IRS Form 1001 (or successor form) claiming an exemption from, or a
reduction of, such withholding United States income tax under the benefit of a
tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
with respect to the Preferred Securities (or on the Senior Subordinated Notes)
is not subject to withholding tax because it is effectively connected with the
Beneficial Owner's conduct of a trade or business in the United States.
As discussed above, the Company will treat the Exchange Notes as
indebtedness for United States federal income tax purposes. If, however, the
Exchange Notes were to be recharacterized as equity, for United States federal
income tax purposes, the income on the Exchange Notes would be recharacterized
as dividends which would generally be subject to 30% withholding tax when paid
to a Non-United States Holder.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest with respect to the Exchange Preferred Securities (or
on the Exchange Notes) is effectively connected with the conduct of such trade
or business, the Non-United States Person, although exempt from the withholding
tax discussed above, will be subject to United States federal income tax on such
interest on a net income basis in the same manner as if it were a United States
Holder. In addition, if such Non-United States Holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30% of its effectively
connected earnings and profits for the taxable year, subject to adjustments. For
this purpose, such interest would be included in such foreign corporation's
earnings and profits.
Any gain realized upon the sale or other taxable disposition of the
Exchange Preferred Securities (or the Exchange Notes) by a Non-United States
Holder generally will not be subject to United States federal income tax unless
(i) such gain is effectively connected with a trade or business carried on in
the United States by such Non-United States Holder, (ii) in the case of a
Non-United States Holder who is an individual, such individual is present in the
United States for 183 days or more in the taxable year of such sale or
disposition, and certain other conditions are met and (iii) in the case of any
gain representing accrued interest with respect to the Exchange Preferred
Securities (or on the Exchange Notes) the requirements described above are not
satisfied.
Information Reporting and Backup Withholding
Income on the Exchange Preferred Securities (or the Exchange Notes)
held of record by United States Persons (other than corporations and other
exempt holders) will be reported annually to such holders and to the IRS. The
Preferred Trustee currently intends to deliver such reports to holders of record
prior to January 31 following each calendar year. It is anticipated that persons
who hold Exchange Preferred Securities (or the Senior Subordinated Notes) as
nominees for beneficial holders will report the required tax information to
beneficial holders on Form 1099.
"Backup withholding" at a rate of 31% will apply to payments of
interest to non-exempt United States Persons unless the holder furnishes its
taxpayer identification number in the manner prescribed in applicable Treasury
regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
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No information reporting or backup withholding will be required with
respect to payments made by the Trust or any Paying Agent to Non-United States
holders if a statement described in (a)(iv) under "Non-United States Holders"
has been received and the payor does not have actual knowledge that the
beneficial owner is a United States Person.
In addition, backup withholding and information reporting will not
apply if payments of the principal, interest, OID or premium with respect to the
Exchange Preferred Securities (or on the Exchange Notes) are paid or collected
by a foreign office of a custodian, nominee or other foreign agent on behalf of
the Beneficial Owner, of if a foreign office of a broker (as defined in
applicable Treasury regulations) pays the proceeds of the sale of the Exchange
Preferred Securities (or the Exchange Notes) to the owner thereof. If, however,
such nominee, custodian, agent or broker is, for United States federal income
tax purposes, a United States person, a controlled foreign corporation or a
foreign person that derives 50% or more of its gross income for certain periods
form the conduct of a trade or business in the United States, such payments will
not be subject to backup withholding but will be subject to information
reporting, unless (1) such custodian, nominee, agent or broker has documentary
evidence in its records that the Beneficial Owner is not a United States person
and certain other conditions are met or (2) the Beneficial Owner otherwise
establishes an exemption.
Payment of the proceeds from disposition of Exchange Preferred
Securities (or Exchange Notes) to or through a United States office of a broker
is subject to information reporting and backup withholding unless the holder or
beneficial owner establishes an exemption from information reporting and backup
withholding.
Any amounts withheld from a holder of the Exchange Preferred Securities
under the backup withholding rules generally will be allowed as a refund or a
credit against such holder's United States federal income tax liability,
provided the required information is furnished to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE EXCHANGE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
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ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Code ("Plans"), may purchase the Exchange Preferred Securities, subject to
the investing fiduciary's determination that the investment in the Exchange
Preferred Securities satisfied ERISA's fiduciary standards and other
requirements applicable to investments by the Plan.
The Department of Labor ("DOL") has issued a regulation (29 C.F.R.
Section 2510.3-101) (the "DOL Regulation") concerning the definition of what
constitutes the assets of a Plan. The DOL Regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a Plan makes an equity investment will be
deemed for purposes of ERISA to be assets of the investing plan unless certain
exceptions apply.
There can be no assurance that any of the exceptions set forth in the
DOL Regulation will apply to the purchase of the Exchange Preferred Securities
offered hereby and, as a result, an investing Plan's assets could be considered
to include an undivided interest in the Exchange Notes and any other assets held
by the Trustees. In the event that assets of the Trust are considered assets of
an investing Plan, the Trust, the Trustee and other persons, in providing
services with respect to the Exchange Notes, may be considered fiduciaries to
such Plan and subject to the fiduciary responsibility provisions of Title I of
ERISA (including the prohibited transaction provisions thereof). In addition,
the prohibited transaction provisions of Section 4975 of the Code would apply
with respect to transactions engaged in by any "disqualified person," as defined
below, involving such assets unless a statutory or administrative exemption
applies.
The Trust and/or any of its affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Code) with respect to the Plans. The acquisition
and ownership of the Exchange Preferred Securities by a Plan (or by an
individual retirement arrangement or other plan described in Section 4975(e)(1)
of the Code) may constitute or result in a prohibited transaction under ERISA or
Section 4975 of the Code, unless the preferred Securities are acquired pursuant
to and in accordance with an applicable exemption.
As a result, Plans should not acquire the Exchange Preferred Securities
unless such Exchange Preferred Securities are acquired pursuant to and in
accordance with an applicable prohibited transaction exemption. Any plans or
other entities whose assets include Plan assets subject to ERISA or Section 4975
of the Code proposing to acquire the Exchange Preferred Securities should
consult with their own counsel.
154
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Preferred Securities for its
own account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Preferred
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by Participating Broker-Dealers during the period referred to
below in connection with resales of Exchange Preferred Securities received in
exchange for Preferred Securities if such Preferred Securities were acquired by
such Participating Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities. The Company and the Trust
have agreed that this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of such Exchange Preferred Securities for a period ending 90 days after the
Expiration Date (subject to extension under certain limited circumstances
described herein) or, if earlier, when all such Exchange Preferred Securities
have been disposed of by such Participating Broker-Dealer. However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Preferred Securities received in exchange for
Preferred Securities pursuant to the Exchange Offer must notify the Company or
the Trust, or cause the Company or the Trust to be notified, on or prior to the
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be
given in the space provided for that purpose in the Letter of Transmittal or may
be delivered to the Exchange Agent at one of the addresses set forth herein
under "The Exchange Offer -- Exchange Agent." See "The Exchange Offer -- Resales
of Exchange Preferred Securities."
Neither the Company or the Trust will receive any cash proceeds from
the issuance of the Exchange Preferred Securities offered hereby. Exchange
Preferred Securities received by broker-dealers for their own accounts in
connection with the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Preferred Securities or a combination of
such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such Exchange Preferred
Securities.
Any broker-dealer that resells Exchange Preferred Securities that were
received by it for its own account in connection with the Exchange Offer and any
broker or dealer that participates in a distribution or such Exchange Preferred
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of Exchange Preferred
Securities and any commissions or concession received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and be delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
155
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes and the Exchange Guarantee will be
passed upon for the Company by Dann Pecar Newman & Kleiman, P.C., Indianapolis,
Indiana. Certain matters relating to United States federal income tax
considerations will be passed upon for the company by Dann Pecar Newman &
Kleiman, P.C., Indianapolis, Indiana. Certain matters of Delaware law relating
to the validity of the Exchange Preferred Securities will be passed upon for the
Trust by Richards, Layton & Finger, Wilmington, Delaware. Principals in the law
firm of Dann Pecar Newman & Kleiman, P.C. own less than 1% of the Common Stock
of the Company.
EXPERTS
The consolidated financial statements and related schedules of the
Company as of December 31, 1995 and 1996 and for each of the years in the
three-year period ended December 31, 1996 appearing in this Prospectus and the
Registration Statement have been audited and reported upon by Coopers & Lybrand
L.L.P., independent accountants, as set forth in their report thereon appearing
elsewhere herein and are included herein upon the authority of said firm as
experts in accounting and auditing. The consolidated financial statements and
related schedules of Superior as of December 31, 1994 and 1995 and for each of
the years in the three-year period ended December 31, 1995 appearing in this
Prospectus and Registration Statement have been audited and reported upon by
Coopers & Lybrand L.L.P., independent accountants, as set forth in their report
thereon appearing elsewhere herein and are included herein upon the authority of
said firm as experts in accounting and auditing.
156
<PAGE>
<TABLE>
GLOSSARY OF TERMS
<CAPTION>
<S> <C>
1940 Act............................ The Investment Company Act of 1940, as amended.
1994 Reform Act..................... The Federal Crop Insurance Reform Act of 1994.
1996 Reform Act..................... The Federal Agriculture Improvement and Reform Act of 1996.
Acquisition......................... The acquisition by GGS Holdings of Superior Insurance
Company, a Florida property and casualty insurer primarily
engaged in the writing of nonstandard automobile insurance.
Actual Production History (APH)..... A plan of MPCI which provides the yield component and yield
forecast of an insured by utilizing the insured's
historic yield record. CRC plans use the policy terms
and conditions of the APH as their basic provisions of coverage.
A.M. Best........................... A.M. Best Company, Inc., a rating agency and publisher
for the insurance industry.
Board of Directors.................. With respect to the Company or a Subsidiary, as the case may be,
the Board of Directors (or other body performing
functions similar to any of those performed by a Board of Directors).
Buyout Transaction.................. A combination of the GGS Buyout and the Repayment from
the proceeds of this offering.
Buy-up Coverage..................... Multi-Peril Crop Insurance policy providing coverage in excess
of that provided by CAT Coverage. Buy-up Coverage is offered
only through private insurers.
Buy-up Expense Reimbursement Payment An expense reimbursement payment made by the FCIC to an MPCI
insurer equal to a percentage of Gross Premiums Written
for each Buy-up Coverage policy written by such MPCI insurer.
Casualty Insurance.................. Insurance which is primarily concerned with the losses caused
by injuries to third persons (i.e., not the policyholder)
and the legal liability imposed on the insured resulting therefrom.
It includes, but is not limited to, employers'
liability, workers' compensation, public liability, automobile
liability, personal liability and aviation liability insurance.
It excludes certain types of loss that by law or
custom are considered as being exclusively within the scope of other
types of insurance, such as fire or marine.
157
<PAGE>
<S> <C>
CAT Coverage (CAT).................. The minimum available level of Multi-Peril Crop
Insurance, providing coverage for 50% of a farmer's
historical yield for eligible crops at 60% of the price
per commodity unit for such crop set by the FCIC.
This coverage is offered through private insurers
and, in certain states, USDA field offices.
CAT Coverage Fee.................... A fixed administrative fee of $50 per policy for
which farmers may purchase CAT Coverage. The
CAT Coverage Fee takes the place of a premium.
CAT LAE Reimbursement Payment....... An LAE reimbursement payment made by the FCIC
to an MPCI insurer equal to 13.0% of MPCI Imputed
Premiums for each CAT Coverage policy written by
such MPCI insurer.
Cede; Ceding Company................ When an insurance company reinsures its risk with
another insurance company, it "cedes" business and
is referred to as the "ceding company."
Code................................ Internal Revenue Code of 1986, as amended.
Combined Ratio...................... The sum of the Expense Ratio and the Loss and LAE
Ratio determined in accordance with GAAP or SAP.
Commission.......................... The Securities and Exchange Commission.
Common Stock....................... The shares of common stock, no par
value, of the Company.
Company (Or SIG).................... Symons International Group, Inc. and its
Subsidiaries, unless the context indicates otherwise.
Contribution........................ The contribution by Pafco of IGF to IGF Holdings in
exchange for all of the capital stock of IGF Holdings.
Crop Revenue Coverage (CRC)......... CRC provides the insured with a guaranteed revenue
stream by combining both yield and price variability
protection and protects against a grower's loss of
revenue resulting from fluctuating crop prices and/or
low yields by providing coverage when any
combination of crop yield and price results in
revenue that is less than the revenue guarantee
provided by the policy.
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<PAGE>
<S> <C>
Crop Year........................... For MPCI, a crop year commences on July 1 and
ends on the following June 30. For example, the
1998 crop year begins July 1, 1997 and ends on June
30, 1998. For crop hail insurance, the crop year is
the calendar year.
Dividend............................ The payment by IGF Holdings to Pafco of a dividend
consisting of $7.5 million in cash and the IGF Note.
EBITDA.............................. Calculation of earnings before income taxes,
minority interest, depreciation and amortization.
Exchange Act........................ The Securities Exchange Act of 1934, as amended.
Expense Ratio....................... Under statutory accounting, the ratio of underwriting
expenses to net premiums written. Under GAAP
accounting, the ratio of underwriting expenses to net
premiums earned.
Federal Crop Insurance Corporation
(FCIC)............................. A wholly owned federal government corporation
within the United States Department of Agriculture
(USDA).
Florida Commissioner................ The Florida Commissioner of Insurance.
Florida Department.................. The Florida Department of Insurance.
Formation Transaction............... The formation of GGS Management Holdings, Inc.,
a corporation which previously was 52% owned by
the Company and 48% owned by the GS Funds.
Fortis.............................. Fortis, Inc., the parent company of Interfinancial, the
former holding company for Superior.
Generally Accepted Accounting
Principles (GAAP).................. Generally accepted accounting principles in the
United States of America as in effect as of the Issue
Date, including those set forth (i) in the opinions and
pronouncements of the Accounting Principles Board
of the American Institute of Certified Public
Accountants (ii) statements and pronouncements of
the Financial Accounting Standards Board (iii) in
such other statements by such other entity as
approved by a significant segment of the accounting
profession and (iv) the rules and regulations of the
SEC governing the inclusion of financial statements
(including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and
similar written statements from the accounting staff
of the SEC.
159
<PAGE>
<S> <C>
GGS Agreement....................... The agreement by and among Goran, SIG, GGS
Holdings and the GS Funds dated January 31, 1996
evidencing the Formation Transaction.
GGS Buyout.......................... The agreement between SIG and GS Funds, an
affiliate of Goldman Sachs, for SIG to purchase GS
Funds' 48% interest in GGS Holdings with a portion
of the proceeds of this Offering.
GGS Holdings........................ GGS Management Holdings, Inc., a holding
company for Pafco and Superior controlled by the
Company.
GGS Management...................... GGS Management, Inc., a wholly owned subsidiary
of GGS Holdings.
GGS Senior Credit Facility.......... A $48 million senior bank facility extended to GGS
Management used to partially fund the purchase of
Superior.
Goldman Sachs....................... Goldman, Sachs & Co.
Goran............................... Goran Capital Inc., a Canadian federally chartered
corporation and the current approximately 67%
shareholder of the Company.
Goran Distribution.................. The distribution by the Company to Goran of all of
the outstanding capital stock of Symons International
Group, Inc. (Florida), a Florida-based surplus lines
underwriting manager.
Granite............................. Granite Insurance Company, a subsidiary of Goran.
Granite Re ......................... Granite Reinsurance Company Ltd., a subsidiary of
Goran domiciled in Barbados.
Gross Premiums Written.............. Direct premiums written plus premiums collected in
respect of policies assumed, in whole or in part, from
other insurance carriers.
GS Funds............................ Investments funds affiliated with Goldman Sachs,
consisting of GS Capital Partners II, L.P.; GS Capital
Partners II Offshore, L.P.; Stone Street Funds L.P.;
Bridge Street Funds L.P.; and Goldman Sachs & Co.
Verwaltungs GmbH.
IBCL................................ The Indiana Business Corporation Law.
IGF................................. IGF Insurance Company, an indirect wholly owned
subsidiary of the Company.
</TABLE>
160
<PAGE>
<TABLE>
<S> <C>
IGFH Bank Debt...................... A bank loan in the principal amount of $7.5 million
issued by IGF Holdings which was repaid from
proceeds of the IPO.
IGF Holdings........................ IGF Holdings, Inc., a wholly owned subsidiary of the
Company.
IGF Note............................ A subordinated promissory note of IGF Holdings in
the principal amount of approximately $3.5 million
issued to Pafco by IGF Holdings as part of the
Dividend.
IGF Revolver........................ IGF's revolving line of credit used to finance
premium payables on amounts not yet received from
farmers.
Incurred but Not Reported (IBNR)
Claims.............................. Claims under policies that have been incurred but
have not yet been reported to the Company by the
insured.
Incurred But Not Reported (IBNR)
Reserves............................ IBNR reserves include LAE related to losses
anticipated from IBNR Claims and may also provide
for future adverse loss development on reported
claims.
Indiana Commissioner................ The Indiana Commissioner of Insurance.
Indiana Department.................. The Indiana Department of Insurance.
Initial Public Offering (IPO)....... The Company's initial public offering of Common
Stock in November 1996.
Insurance Regulatory Information
System (IRIS)...................... A system of ratio analysis developed by the NAIC
primarily intended to assist state insurance
departments in executing their statutory mandates to
oversee the financial condition of insurance
companies.
Insurers or Insurance Subsidiaries.. The direct and indirect consolidated insurance
subsidiaries of the Company, which include IGF,
Pafco and Superior.
Interfinancial...................... Interfinancial, Inc., a wholly owned subsidiary of
Fortis, Inc. and the former holding company for
Superior.
IRS................................. Internal Revenue Service.
LIBOR............................... An annual rate equal to the London Interbank
Offered Rate for the corresponding deposits of
United States dollars.
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<S> <C>
Loss Adjustment Expenses (LAE)...... Expenses incurred in the settlement of claims,
including outside adjustment expenses, legal fees and
internal administrative costs associated with the
claims adjustment process, but not including general
overhead expenses.
Loss and LAE Ratio (Loss Ratio)..... The ratio of Losses and LAE incurred to premiums
earned.
Loss and LAE Reserves............... Liabilities established by insurers to reflect the
ultimate estimated cost of claim payments as of a
given date.
MPCI Excess LAE Reimbursement
Payment............................ A small excess LAE reimbursement payment made
by the FCIC to an MPCI insurer of two hundredths
of one percent of MPCI Retention determined after
ceding to the FCIC's three reinsurance pools, to the
extent that loss ratios on a per state basis exceeds
certain levels.
MPCI Imputed Premium................ For purposes of the profit/loss sharing arrangement
with the federal government, the amount of
premiums credited to the Company for all CAT
Coverage it sells, as such amount is determined by
formula.
MPCI Premium........................ For purposes of the profit/loss sharing arrangement
with the federal government, the amount of
premiums credited to the Company for all Buy-up
Coverage sold, consisting of amounts paid by
farmers plus the amount of any related federal
premium subsidies.
MPCI Retention...................... The aggregate amount of MPCI Premium and MPCI
Imputed Premium on which the Company retains
risk after allocating farms to the three federal
reinsurance pools.
Multi-Peril Crop Insurance (MPCI)... A federally-regulated and subsidized crop insurance
program that provides producers of crops with
varying levels of insurance protection against
substantially all natural perils to growing crops.
NAIC................................ The National Association of Insurance
Commissioners.
NASDAQ National Market.............. The NASDAQ Stock Market's National Market.
NCIS................................ National Crop Insurance Services, Inc., the actuarial
data facility for the commercial crop insurance
industry.
162
<PAGE>
<S> <C>
Net Premiums Earned................. The portion of net premiums written applicable to the
expired period of policies and, accordingly,
recognized as income during a given period.
Net Premiums Written ............... Total premiums for insurance written (less any return
premiums) during a given period, reduced by
premiums ceded in respect of liability reinsured by
other carriers.
Nonstandard Automobile Insurance.... Personal lines automobile insurance written for those
individuals presenting an above average risk profile
in terms of payment history, driving experience,
record of prior accidents or driving violations,
particular occupation or type of vehicle and other
factors.
OID................................. Original issue discount under the Code.
Pafco............................... Pafco General Insurance Company, an Indiana
property and casualty insurance company.
Policies In-Force................... Policies written and recorded on the books of an
insurance carrier which are unexpired as of a given
date.
Price Election...................... The maximum per unit commodity price by crop to
be used in computing MPCI Premiums, which is set
each year by the FCIC.
Quota Share Reinsurance............. A form of reinsurance in which the reinsurer shares
a proportional part of both the original premiums and
the losses of the reinsured.
Reinsurance......................... The practice whereby a company called the
"reinsurer" assumes, for a share of the premium, all
or part of a risk originally undertaken by another
insurer called the "ceding" company or "cedent."
Reinsurance may be affected by "treaty" reinsurance,
where a standing agreement between the ceding and
reinsuring companies automatically covers all risks
of a defined category, amount and type, or by
"facultative" reinsurance where reinsurance is
negotiated and accepted on a risk-by-risk basis.
Repayment........................... The payment of GGS Senior Credit Facility
indebtedness with a portion of the proceeds from this
offering.
Retention........................... The amount of liability, premiums or losses which an
insurance company keeps for its own account after
reinsurance.
163
<PAGE>
<S> <C>
Risk-based Capital (RBC)
Requirements........................ Capital requirements for property and casualty
insurance companies adopted by the NAIC to assess
minimum capital requirements and to raise the level
of protection that statutory surplus provides for
policyholder obligations.
Securities Act...................... The Securities Act of 1933, as amended.
Senior Subordinated Notes........... The Company's securities to be purchased with the
proceeds of the Offering.
Short-Tail.......................... A "short-tail" insurance product is one where losses
are known comparatively quickly; ultimate losses
under a "long-tail" insurance product are sometimes
not known for years.
SIG (Or The Company)................ Symons International Group, Inc., a specialty insurer
which underwrites and markets nonstandard private
passenger automobile insurance and crop insurance.
SIGF................................ Symons International Group, Inc. (Florida), a Florida
based surplus lines underwriting manager and a
subsidiary of Goran.
SIGL................................ Symons International Group, Ltd., a Canadian
corporation and the controlling shareholder of Goran.
Standard Automobile Insurance....... Personal lines automobile insurance written for those
individuals presenting an average risk profile in
terms of loss history, driving record, type of vehicle
driven and other factors.
Statutory Accounting Practices (SAP) Accounting practices which consist of recording
transactions and preparing financial statements in
accordance with the rules and procedures prescribed
or permitted by state regulatory authorities.
Statutory accounting emphasizes solvency rather
than matching revenues and expenses during an
accounting period.
Subsidiaries........................ All of the direct and indirect consolidated
subsidiaries of the Company.
164
<PAGE>
<S> <C>
Superior............................ Superior Insurance Company, a Florida property and
casualty insurer primarily engaged in the writing of
nonstandard automobile insurance and its principal
subsidiaries, Superior American Insurance Company,
a Florida insurance company and Superior Guaranty
Insurance Company, a Florida insurance company.
Superior Purchase Agreement......... Stock Purchase Agreement, dated January 31, 1996,
by and among Goran, the Company, Fortis and
Interfinancial pursuant to which the Company
purchased Superior.
Tail................................ The period of time that elapses between the
incurrence and settlement of losses under a policy.
Transactions........................ The Formation Transaction, the Acquisition and
other related transactions, including the Transfer and
the Dividend.
Transfer............................ The transfer by Pafco of all of the outstanding capital
stock of IGF to IGF Holdings and the distribution of
IGF Holdings to the Company.
Treaty Reinsurance.................. The reinsurance of a specified type or category of
risks defined in a reinsurance agreement (a "treaty")
between a primary insurer or other reinsured and a
reinsurer. Typically, in treaty reinsurance, the
primary insurer or reinsured is obligated to offer and
the reinsurer is obligated to accept a specified portion
of all such type or category of risks originally
underwritten by the primary insurer or reinsured.
Underwriting........................ The insurer's or reinsurer's process of reviewing
applications submitted for insurance coverage,
deciding whether to accept all or part of the coverage
requested and determining the applicable premiums.
USDA................................ United States Department of Agriculture.
</TABLE>
165
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Symons International Group, Inc. and Subsidiaries
Report of Independent Accountants...........................................F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of
December 31, 1995 and 1996
and June 30, 1997...........................................................F-3
Consolidated Statements of Earnings
for the Years Ended December 31, 1994,
1995 and 1996 and the Six Months Ended
June 30, 1996 and 1997......................................................F-4
Consolidated Statements of Changes
in Stockholder's Equity for the
Years Ended December 31, 1994, 1995
and 1996 and the Six Months Ended
June 30, 1996 and 1997......................................................F-5
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1994,
1995 and 1996 and the Six Months
Ended June 30, 1996 and 1997................................................F-6
Notes to Consolidated Financial Statements.....................F-7 through F-37
Superior Insurance Company and Subsidiaries
Report of Independent Accountants..........................................F-38
Consolidated Financial Statements:
Consolidated Balance Sheets as of
December 31, 1994 and 1995 and
June 30, 1996..............................................................F-39
Consolidated Statements of Earnings
for the Years Ended December 31, 1993,
1994 and 1995 and the Six Months
Ended June 30, 1995 and 1996...............................................F-40
Consolidated Statements of Changes
in Stockholder's Equity for the
Years Ended December 31, 1993, 1994
and 1995 and the Six Months Ended
June 30, 1995 and 1996....................................................F-41
Consolidated Statements of Cash
Flows for the Years Ended December
31, 1993, 1994 and 1995 and the
Six Months Ended June 30, 1995 and 1996....................................F-42
Notes to Consolidated Financial Statements....................F-43 through F-58
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of
Symons International Group, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Symons
International Group, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Symons
International Group, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand
Indianapolis, Indiana
March 21, 1997
F-2
<PAGE>
<TABLE>
SYMONS INTERNATIONAL GROUP, INC.
Consolidated Balance Sheets
as of December 31, 1995 and 1996 and June 30, 1997
(dollars in thousands, except share data)
<CAPTION>
<S> <C> <C> <C>
December 31, December 31, June 30,
1995 1996 1997
-------------- -------------- --------------
ASSETS: (unaudited)
Investments
Available for Sale:
Fixed Maturities, at market $ 12,931 $ 127,681 $ 143,905
Equity Securities, at market 4,231 27,920 32,031
Short-term investments, at amortized cost which
approximates market 5,283 9,565 11,742
Real Estate, at cost 487 466 457
Mortgage Loans, at cost 2,920 2,430 2,290
Other 50 75 75
Investments in and advances to related parties 2,952 1,152 2,418
Cash and cash equivalents 2,311 13,095 18,329
Receivables (net of allowance for doubtful account
of $927, $1,480 and $1,340
(unaudited) in 1995, 1996 and June 30, 1997 8,203 65,194 176,045
Reinsurance recoverable on paid and unpaid losses, net 54,136 48,294 70,694
Prepaid reinsurance premiums 6,263 14,983 73,927
Deferred policy acquisition costs 2,379 12,800 13,121
Deferred income taxes 1,421 3,329 2,899
Property and equipment, net of accumulated depreciation 5,502 8,137 9,555
Federal income taxes recoverable --- 319 ---
Goodwill --- 2,122 2,114
Other 1,447 7,117 8,039
----- ----- -----
Total Assets $ 110,516 $ 344,679 $ 567,641
======= ======= =======
LIABILITIES:
Losses and loss adjustment expenses $ 59,421 $ 101,719 $ 137,924
Unearned premiums 17,497 87,285 160,741
Reinsurance payable 6,206 6,508 100,475
Payables to affiliates 6,474 366 ---
Federal income tax payable 133 --- 1,594
Line of credit and notes payable 5,811 --- ---
Term debt --- 48,000 44,872
Other 5,439 18,291 23,411
----- ------ ------
Total Liabilities 100,981 262,169 469,017
------- ------- -------
Minority Interest in Consolidated Subsidiary --- 21,610 26,724
--- ------ ------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock, no par value, 100,000,000 shares
authorized and 7,000,000, 10,450,000 and
10,450,000 (unaudited) issued and outstanding
in 1995, 1996 and 1997, respectively 1,000 38,969 39,019
Additional paid-in capital 3,130 5,905 5,905
Unrealized gain/(loss) on investments, net of
deferred tax benefit (expense) of
$23 in 1995, $625 in 1996 and $(72)
(unaudited) at June 30, 1997 (45) 820 2,184
Retained earnings 5,450 15,206 24,792
----- ------ ------
Total Stockholders' Equity 9,535 60,900 71,900
----- ------ ------
Total Liabilities and Stockholders' Equity $ 110,516 $ 344,679 $ 567,641
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
<PAGE>
<TABLE>
SYMONS INTERNATIONAL GROUP, INC.
Consolidated Statements of Earnings
for the Years Ended December 31, 1994, 1995 and 1996
and the Six Months Ended June 30, 1996 and 1997
(dollars in thousands, except per share data)
Six Months Ended
Years Ended December 31, June 30,
--------------------------------------------- ----------------------------
<CAPTION>
(unaudited)
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
Gross premiums written $ 103,134 $ 124,634 $ 305,499 $ 146,950 $ 279,065
Less ceded premiums (67,995) (71,187) (95,907) (69,908) (128,541)
-------- -------- -------- -------- ---------
Net premiums written 35,139 53,447 209,592 77,042 150,524
Change in unearned premiums (3,013) (3,806) (17,833) (17,976) (14,512)
------- ------- -------- -------- --------
Net premiums earned 32,126 49,641 191,759 59,066 136,012
Net investment income 1,241 1,173 6,733 1,533 5,276
Other income 1,632 2,170 9,286 4,062 10,791
Net realized capital gain/(loss) (159) (344) (1,015) 228 1,684
----- ----- ------- --- -----
Total Revenues 34,840 52,640 206,763 64,889 153,763
------ ------ ------- ------ -------
Expenses:
Loss and loss adjustment expenses 26,470 35,971 137,109 45,275 103,293
Policy acquisition and general
and administrative expenses 5,801 7,981 42,013 12,283 30,397
Interest expense 1,184 1,248 3,938 1,261 2,744
----- ----- ----- ----- -----
Total Expenses 33,455 45,200 183,060 58,819 136,434
------ ------ ------- ------ -------
Earnings before income taxes
and minority interest 1,385 7,440 23,703 6,070 17,329
----- ----- ------ ----- ------
Income taxes:
Current income tax expense 462 2,275 7,982 1,190 7,252
Deferred income tax expense (benefit) (1,180) 344 64 664 (1,069)
------- --- -- --- -------
Total Income Taxes (718) 2,619 8,046 1,854 6,183
----- ----- ----- ----- -----
Net earnings before minority interest 2,103 4,821 15,657 4,216 11,146
Minority interest 14 --- (2,401) 88 (1,560)
-- --- ------- -- -------
Net Earnings $ 2,117 $ 4,821 $ 13,256 $ 4,304 $ 9,586
===== ===== ====== ===== =====
Weighted average shares outstanding 7,000 7,000 7,537 7,000 10,617
===== ===== ===== ===== ======
Net earnings per share $ 0.30 $ 0.69 $ 1.76 $ 0.61 $ 0.90
==== ==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
<PAGE>
<TABLE>
SYMONS INTERNATIONAL GROUP, INC.
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1994,
1995 and 1996
and the Six Months ended June 30, 1996 and 1997
(dollars in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additional Unrealized Gain Retained Total
Common Paid-In (Loss) on Earnings Stockholders'
Stock Capital Investments (Deficit) Equity
----- ------- ----------- --------- ------
Balance at January 1, 1994 $ 1,000 $ 3,130 $ (423) $ (1,488) $ 2,219
Unrealized gain on fixed maturities,
resulting from a change in accounting
principle, net of deferred taxes --- --- 139 --- 139
Change in unrealized loss on
investments, net of deferred taxes --- --- (220) --- (220)
Net Earnings --- --- --- 2,117 2,117
--- --- --- ----- -----
Balance at December 31, 1994 1,000 3,130 (504) 629 4,255
Change in unrealized loss on
investments, net of deferred taxes --- --- 459 --- 459
Net Earnings --- --- --- 4,821 4,821
--- --- --- ----- -----
Balance at December 31, 1995 1,000 3,130 (45) 5,450 9,535
Sale of subsidiary stock --- 3,389 --- --- 3,389
Change in unrealized loss on
investments, net of deferred taxes
(unaudited) --- --- 529 --- 529
Net Earnings (unaudited) --- --- --- 4,304 4,304
--- --- --- ----- -----
Balance at June 30, 1996 (unaudited) $ 1,000 $ 6,519 $ 484 $ 9,754 $ 17,757
===== ===== === ===== ======
Balance at December 31, 1995 $ 1,000 $ 3,130 $ (45) $ 5,450 $ 9,535
Sale of subsidiary stock --- 2,775 --- --- 2,775
Change in unrealized loss on
investments, net of deferred taxes --- --- 865 --- 865
Issuance of common stock 37,969 --- --- --- 37,969
Dividend to parent --- --- --- (3,500) (3,500)
Net Earnings --- --- --- 13,256 13,256
--- --- --- ------ ------
Balance at December 31, 1996 $ 38,969 $ 5,905 $ 820 $ 15,206 $ 60,900
Adjustment of Offering costs 50 --- --- --- 50
Change in unrealized gain on
investments, net of deferred taxes
(unaudited) --- --- 1,364 --- 1,364
Net Earnings (unaudited) --- --- --- 9,586 9,586
--- --- --- ----- -----
Balance at June 30, 1997
(unaudited) $ 39,019 $ 5,905 $ 2,184 $ 24,792 $ 71,900
====== ===== ===== ====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
<PAGE>
<TABLE>
SYMONS INTERNATIONAL GROUP, INC.
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1994,1995 and 1996
and the Six Months Ended June 30, 1996 and 1997
(dollars in thousands)
Six Months Ended
Years Ended December 31, June 30,
--------------------------------------------- --------------------------
(unaudited)
<CAPTION>
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings For the Period $ 2,117 $ 4,821 $ 13,256 $ 4,304 $ 9,586
Adjustments to reconcile Net
Earnings to Net Cash provided
from (used in) Operations:
Minority interest (14) --- 2,401 (88) 1,560
Depreciation and amortization 690 742 2,194 221 1,169
Deferred income tax expense (benefit) (1,180) 344 64 664 (1,068)
Net realized capital loss/(gain) 159 344 1,015 (228) (1,684)
Net changes in operating assets and
liabilities (net of assets acquired):
Receivables (9,057) 6,462 (22,673) (48,085) (110,851)
Reinsurance recoverable on paid and
unpaid losses, net 25,130 (41,250) 5,842 (29,475) (22,400)
Prepaid reinsurance premiums (3,343) 725 (8,720) (3,824) (58,944)
Deferred policy acquisition costs (727) (900) (2,496) (2,888) (321)
Other assets 98 1,019 (2,923) (3,264) (1,198)
Losses and loss adjustment expenses (24,874) 30,152 (2,125) (10,216) 36,205
Unearned premiums 6,356 3,081 24,508 52,077 73,456
Reinsurance payables 1,982 2,133 (1,978) 46,349 93,967
Federal income taxes recoverable/(payable) 759 325 (1,270) (490) 1,913
Other liabilities (1,398) 1,656 2,908 2,925 5,120
------- ----- ----- ----- -----
Net Cash Provided From (used in) Operations (3,302) 9,654 10,003 7,982 26,510
------- ----- ------ ----- ------
Cash Flow Provided From (Used In)
Investing Activities:
Cash paid for Superior net of cash acquired --- --- (66,590) (66,389) ---
Net (Purchases)/Sales of short-term investments (308) (4,493) 8,026 11,342 (2,177)
Purchases of fixed maturities (7,587) (12,517) (73,503) (24,976) (36,846)
Proceeds from sales, calls and
maturities of fixed maturities 8,460 8,603 56,903 17,896 20,964
Proceeds from sales of equity securities 10,510 29,599 19,796 65,944 16,531
Purchase of equity securities (10,122) (28,173) (34,157) (86,177) (15,188)
Proceeds from the sale of real estate 1,165 --- --- --- ---
Purchases of mortgage loans (50) (100) --- --- ---
Proceeds from repayment of mortgage loans 60 120 490 360 140
Purchase of property and equipment (655) (1,874) (3,734) (579) (2,294)
----- ------- ------- ----- -------
Net cash provided from (used in)
investing activities 1,473 (8,835) (92,769) (82,579) (18,870)
----- ------- -------- -------- --------
Cash flow provided from (used in)
from financing activities:
Proceeds from initial public offering,
net of expenses --- --- 37,969 --- ---
Proceeds from line of credit and notes payable 26,900 1,620 --- 7,750 ---
Proceeds from term debt --- --- 48,000 48,000 (3,128)
Payments on line of credit and notes payable (26,459) (1,250) (5,811) (5,811) ---
Proceeds from consolidated subsidiary
minority interest owner --- --- 21,200 21,200 2,304
Payment of dividend to parent --- --- (3,500) --- ---
Repayments from related parties 711 44 1,800 1,063 ---
Loans from and (repayments to) related parties 425 1,036 (6,108) 84 (1,582)
--- ----- ------- -- -------
Net cash provided from financing activities 1,577 1,450 93,550 72,286 (2,406)
----- ----- ------ ------ -------
Increase (decrease) in cash and cash equivalents (252) 2,269 10,784 (2,311) 5,234
Cash and cash equivalents, beginning of year 294 42 2,311 2,311 13,095
--- -- ----- ----- ------
Cash and cash equivalents, end of year $ 42 $ 2,311 $ 13,095 $ -- 18,329
== ===== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
1. Nature of Operations and Significant Accounting Policies
Symons International Group, Inc. (the "Company") is a 67% owned
subsidiary of Goran Capital, Inc. (Goran). The Company is primarily involved in
the sale of personal nonstandard automobile insurance and crop insurance.
Nonstandard automobile represents approximately 61% of the Company's premium
volume. The Company's products are marketed through independent agents and
brokers, within a 31-state area, primarily in the Midwest and Southern United
States. The following is a description of the significant accounting policies
and practices employed:
a. Principles of Consolidation: The consolidated financial statements
include the accounts, after intercompany eliminations, of the Company and its
subsidiaries as follows:
GGS Management Holdings, Inc. (GGS Holdings)-a holding company for the
nonstandard automobile operations which includes GGS Management, Inc.,
Pafco General Insurance Company, Pafco Premium Finance Company and the
Superior entities, as described below - 52% owned;
GGS Management, Inc. (GGS)-a management company for the nonstandard
automobile operations-52% owned;
Superior Insurance Company (Superior)-an insurance company domiciled
in Florida-52% owned;
Superior American Insurance Company (Superior American)-an insurance
company domiciled in Florida-52% owned;
Superior Guaranty Insurance Company (Superior Guaranty)-an insurance
company domiciled in Florida-52% owned;
Pafco General Insurance Company (Pafco)-an insurance company domiciled
in Indiana-52% owned;
IGF Holdings, Inc. (IGF Holdings)-a holding company for the crop
operations which includes IGF and Hail Plus Corp.-100% owned; and
IGF Insurance Company (IGF)-an insurance company domiciled in
Indiana-100% owned.
On January 31, 1996, the Company entered into an agreement with GS
Capital Partners II, L.P. (Goldman Funds) to create a company, GGS Holdings, to
be owned 52% by the Company and 48% by Goldman Funds. GGS Holdings created GGS,
a management company for the nonstandard automobile operations which include
PGIC and the Superior entities.
On April 30, 1996, GGS Holdings acquired the Superior entities through
a purchase business combination. The Company's Consolidated Results of
Operations for the year ended December 31, 1996 include the results of
operations of the Superior entities subsequent to April 30, 1996. (See Note 2.)
F-7
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
On January 1, 1996, the Company sold its excess and surplus lines
insurance operations, Symons International Group, Inc. of Florida (SIGF), with a
net book value of $2, to Goran for $2. Accordingly, no gain or loss was
recognized in 1996 on the transaction.
b. Basis of Presentation: The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles (GAAP)
which differ from statutory accounting practices (SAP) prescribed or permitted
for insurance companies by regulatory authorities in the following respects:
Certain assets are excluded as "Nonadmitted Assets" under statutory
accounting.
Costs incurred by the Company relating to the acquisition of new
business are expensed for statutory purposes.
The investment in wholly owned subsidiaries is consolidated for GAAP
rather than valued on the statutory equity method. The net income or loss and
changes in unassigned surplus of the subsidiaries is reflected in net income for
the period rather than recorded directly to unassigned surplus.
Fixed maturity investments are reported at amortized cost or market
value based on their National Association of Insurance Commissioners' (NAIC)
rating.
The liability for losses and loss adjustment expenses and unearned
premium reserves are recorded net of their reinsured amounts for statutory
accounting purposes.
Deferred income taxes are not recognized on a statutory basis.
Credits for reinsurance are recorded only to the extent considered
realizable. Under SAP, credit for reinsurance ceded are allowed to the extent
the reinsurers meet the statutory requirements of the Insurance Departments of
the States of Indiana and Florida, principally statutory solvency.
c. Use of Estimates: The preparation of financial statements of insurance
companies requires management to make estimates and assumptions that affect
amounts reported in the financial statements and accompanying notes. Such
estimates and assumptions could change in the future as more information becomes
known which could impact the amounts reported and disclosed herein.
F-8
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
Net earnings and capital and surplus for the insurance subsidiaries
reported on the statutory accounting basis is as follows:
1996 1995 1994
---------- ---------- ---------
Capital and surplus:
Superior entities $ 57,121 $ N/A $ N/A
Pafco 18,112 11,875 7,848
IGF 29,412 9,219 4,512
Net earnings (losses):
Superior entities $ 1,978 $ N/A $ N/A
Pafco 5,151 (553) (571)
IGF 12,122 6,574 1,511
d. Premiums: Premiums are recognized as income ratably over the life of the
related policies and are stated net of ceded premiums. Unearned premiums are
computed on the semimonthly pro rata basis.
e. Investments: Investments are presented on the following bases: Fixed
maturities and equity securities-at market value-all such securities are
classified as available for sale and are carried at market value with the
unrealized gain or loss as a component of stockholders' equity, net of deferred
tax, and accordingly, has no effect on net income.
Real estate-at cost, less allowances for depreciation.
Mortgage loans-at outstanding principal balance.
Realized gains and losses on sales of investments are recorded on the
trade date and are recognized in net income on the specific identification
basis. Interest and dividend income are recognized as earned.
f. Cash and Cash Equivalents: For purposes of the statement of cash flows, the
Company includes in cash and cash equivalents all cash on hand and demand
deposits with original maturities of six months or less.
g. Deferred Policy Acquisition Costs: Deferred policy acquisition costs are
comprised of agents' commissions, premium taxes and certain other costs which
are related directly to the acquisition of new and renewal business, net of
expense allowances received in connection with reinsurance ceded, which have
been accounted for as a reduction of the related policy acquisition costs and
are deferred and amortized accordingly. These costs are deferred and amortized
over the terms of the policies to which they relate. Acquisition costs that
exceed estimated losses and loss adjustment expenses and maintenance costs are
charged to expense in the period in which those excess costs are determined.
F-9
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
h. Property and Equipment: Property and equipment are recorded at cost.
Depreciation for buildings is based on the straight-line method over 31.5 years
and the declining balance method for other property and equipment over their
estimated useful lives ranging from five to seven years. Asset and accumulated
depreciation accounts are relieved for dispositions, with resulting gains or
losses reflected in net earnings.
i. Other Assets: Other assets consists primarily of goodwill, debt acquisition
costs, and organization costs. Goodwill resulting from the acquisition of the
Superior entities is amortized over a 25-year period on a straight-line basis
based upon management's estimate of the expected benefit period. Deferred debt
acquisition costs are amortized over the term of the debt (six years).
Organization costs are amortized over five years.
j. Losses and Loss Adjustment Expenses: Reserves for losses and loss adjustment
expenses include estimates for reported unpaid losses and loss adjustment
expenses and for estimated losses incurred but not reported. These reserves have
not been discounted. The Company's losses and loss adjustment expense reserves
include an aggregate stop-loss program. The Company retains an independent
actuarial firm to estimate reserves. Reserves are established using individual
case-basis valuations and statistical analysis as claims are reported. Those
estimates are subject to the effects of trends in loss severity and frequency.
While management believes the reserves are adequate, the provisions for losses
and loss adjustment expenses are necessarily based on estimates and are subject
to considerable variability. Changes in the estimated reserves are charged or
credited to operations as additional information on the estimated amount of a
claim becomes known during the course of its settlement. The reserves for losses
and loss adjustment expenses are reported net of the receivables for salvage and
subrogation of approximately $4,766 and $948 at December 31, 1996 and 1995,
respectively.
k. Income Taxes: The Company utilizes the liability method of accounting for
deferred income taxes. Under the liability method, companies will establish a
deferred tax liability or asset for the future tax effects of temporary
differences between book and taxable income. Changes in future tax rates will
result in immediate adjustments to deferred taxes. (See Note 11.) Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.
l. Reinsurance: Reinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Premiums ceded to other companies have been reported as a
reduction of premium income.
m. Certain Accounting Policies for Crop Insurance Operations: In 1996, IGF
instituted a policy of recognizing (i) 35% of its estimated Multi Peril Crop
Insurance (MPCI) gross premiums written for each of the first and second
quarters, (ii) commission expense at a rate of 16% of MPCI gross premiums
written recognized, and (iii) Buy-up Expense Reimbursement at a rate of 31% of
MPCI gross premiums written recognized along with normal operating expenses
incurred in connection with premium writings. In the third quarter, if a
sufficient volume of policyholder acreage reports have been received and
processed by IGF, IGF's policy is to recognize MPCI gross premiums written for
the first nine months based on a reestimate which takes into account actual
gross premiums processed. IGF followed the foregoing approach for the 1996 third
quarter. If an insufficient volume of policies has been processed, IGF's policy
is to recognize in the third quarter 20% of its full year estimate of MPCI gross
premiums written, unless other circumstances require a different approach. The
remaining amount of gross premiums written is recognized in the fourth quarter,
when all amounts are reconciled. In prior years, recognition of MPCI gross
premiums written was 30%,
F-10
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
30%, 30% and 10%, for the first, second, third and fourth quarters,
respectively. Commencing with its June 30, 1995 financial statements, IGF also
began recognizing MPCI underwriting gain or loss during the first and second
quarters, as well as the third quarter, reflecting IGF's best estimate of the
amount of such gain or loss to be recognized for the full year, based on, among
other things, historical results, plus a provision for adverse developments.
n. Accounting Changes: On January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities, (Statement 115). In accordance with
Statement 115, prior period financial statements have not been restated to
reflect the change in accounting principle. The cumulative effect as of January
1, 1994 of adopting Statement 115 had no effect on net earnings. The effect of
this change in accounting principle was an increase to stockholders' equity of
$139, net of deferred taxes of $73, of net unrealized gains on fixed maturities
classified as available for sale that were previously carried at amortized cost.
On January 1, 1996, the Company adopted the provisions of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS No. 121 requires that long-lived assets to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This statement is effective for financial statements for fiscal
years beginning after December 15, 1995. Adoption of SFAS No. 121 did not have a
material impact on the Company's results of operations.
In December 1995, SFAS No. 123, Accounting for Stock-Based
Compensation, was issued. It introduces the use of a fair value-based method of
accounting for stock-based compensation. It encourages, but does not require,
companies to recognize compensation expense for stock-based compensation to
employees based on the new fair value accounting rules. Companies that choose
not to adopt the new rules will continue to apply the existing accounting rules
contained in Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. However, SFAS No. 123 requires companies that choose not to
adopt the new fair value accounting rules to disclose pro forma net income and
earnings per share under the new method. SFAS No. 123 is effective for financial
statements for fiscal years beginning after December 15, 1995. The Company has
adopted the disclosure provisions of SFAS No. 123 (see Note 22).
In February 1997, SFAS No. 128, Earnings per Share, was issued. This
statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This statement simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, Earnings per Share, and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures, and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to Opinion 15.
F-11
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
This statement is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. This statement requires restatement of all prior period EPS
data presented. The Company has determined the adoption of this statement will
not have a material effect on its consolidated financial statements.
o. Vulnerability from Concentration: At December 31, 1996, the Company did not
have a material concentration of financial instruments in an industry or
geographic location. Also at December 31, 1996, the Company did not have a
concentration of (1) business transactions with a particular customer, lender or
distributor, (2) revenues from a particular product or service, (3) sources of
supply of labor or services used in the business, or (4) a market or geographic
area in which business is conducted that makes it vulnerable to an event that is
at least reasonably possible to occur in the near term and which could cause a
serious impact to the Company's financial condition.
p. Earnings Per Share: The Company's net earnings per share calculations are
based upon the weighted average number of shares of common stock outstanding
during each period, as restated for the 7,000-for-1 stock split. The weighted
average shares outstanding in 1996 have been increased by 44,000 shares for the
$3.5 million dividend paid to Goran from the proceeds of the offering, in
accordance with GAAP. Earnings per share for the first quarter of 1997 were
computed using actual weighted average shares outstanding during the first
quarter of 1997 of 10,450,000 plus 191,000 assumed shares from stock options
proceeds calculated based upon the treasury stock method.
q. Unaudited Interim Financial Statements: The consolidated financial statements
for the six months ended June 30, 1996 and 1997 have been prepared using the
applicable accounting principles used in the audited financial statements. These
statements are unaudited but, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments and accruals)
necessary for a fair presentation of the financial information set forth herein.
The operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
2. Corporate Reorganization and Acquisition
In April 1996, Pafco contributed all of the outstanding shares of
capital stock of IGF to IGF Holdings, a wholly owned and newly formed subsidiary
of Pafco, and the Board of Directors of IGF Holdings declared an $11,000
distribution to Pafco in the form of cash of $7,500 and a note payable of $3,500
(PGIC Note). IGF Holdings borrowed the $7,500 portion of the distribution from a
bank (IGFH Note). The notes were paid in full from the proceeds of the Offering.
Immediately following the distribution, Pafco distributed all of the outstanding
common stock of IGF Holdings to the Company. Although the Company believes the
plan of reorganization or spin off did not result in gain or loss, no assurance
can be given that the Internal Revenue Service will not challenge the
transaction.
On January 31, 1996, the Company entered into an agreement (Agreement)
with GS Capital Partners II, L.P. to create GGS Holdings, to be owned 52% by the
Company and 48% owned by the Goldman Funds. In accordance with the Agreement, on
April 30, 1996, the Company contributed certain fixed assets and PGIC with a
combined book value, determined in accordance with GAAP, of $17,186, to GGS
Holdings. Goldman Funds contributed $21,200 to GGS Holdings, in accordance with
the Agreement. In return for the cash contribution of $21,200, Goldman Funds
received a minority interest share in GGS Holdings at the date of contribution
of $18,425, resulting in a $2,775 increase to additional paid-in capital. At
December 31, 1996, Goldman Funds' minority interest share consisted of the
following:
Contribution, April 30, 1996 $ 18,425
GGS Holdings earnings 2,401
Unrealized gains, net of deferred tax of $599 784
--------------
$ 21,610
--------------
F-12
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
In connection with the above transactions, GGS Holdings acquired (the
"Acquisition") all of the outstanding shares of common stock of Superior
Insurance Company and its wholly owned subsidiaries, domiciled in Florida,
(collectively referred to as "Superior") for cash of $66,590. In conjunction
with the Acquisition, the Company's funding was through a senior bank facility
of $48,000 and a cash contribution from Goldman Funds of $21,200.
The acquisition of Superior was accounted for as a purchase and was
recorded as follows:
Assets required:
Invested assets $ 118,665
Receivables 34,933
Deferred acquisition costs 7,925
Other assets 2,082
--------------
Total 163,605
--------------
Liabilities assumed:
Unpaid losses and loss adjustment expense 44,423
Unearned premiums 45,280
Other liabilities 10,863
--------------
Total 100,566
--------------
Net assets acquired 63,039
Purchase price 66,590
--------------
Excess purchase price 3,551
Less amounts allocated to deferred income taxes 1,334
on unrealized gains on investments
--------------
Goodwill $ 2,217
==============
The Company's results from operations for the year ended December 31,
1996 include the results of Superior subsequent to April 30, 1996.
3. Initial Public Offering
On November 5, 1996, the Company sold 3,000,000 shares at $12.50 per
share in an initial public offering of common stock (the "IPO"). An additional
450,000 shares were sold in December 1996 representing the exercise of the
overallotment option. The Company generated net proceeds, after underwriter's
discount and expenses, of $37,900 from the IPO. The proceeds were used to repay
the IGFH Note and PGIC Note totaling $11,000, repay
F-13
<PAGE>
indebtedness to Goran and Granite Re of approximately $7,500, pay Goran a
dividend of $3,500 and contribute capital to IGF of $9,000. The remainder will
be used for general corporate purposes, including acquisitions. After completion
of the IPO, Goran owns 67% of the total common stock outstanding.
Assuming that these transactions, described in Notes 2 and 3, took
place (including the IPO) at January 1, 1995 or at January 1, 1996, the pro
forma effect of these transactions on the Company's Consolidated Statements of
Earnings is as follows:
1996 1995
----------------- ------------------
(unaudited)
Revenues $ 250,848 $ 159,899
Net Earnings $ 15,238 $ 6,701
Net Earnings Per Common Share $ 1.42 $ 0.65
Assuming that these transactions took place (including the IPO) at
January 1, 1995 or January 1, 1996 and that shares outstanding only included
shares issued in connection with the IPO whose proceeds were used to repay
indebtedness, the pro forma effect of these transactions on the Company's net
income per common share is as follows:
1996 1995
----------------- ------------------
(unaudited)
Net Earnings Per Common Share $1.86 $0.81
================= ==================
Outstanding shares used in the above calculation include the 7,000,000
shares outstanding before the IPO plus 1,200,000 shares issued in connection
with the IPO whose proceeds were used to pay external indebtedness. The latter
calculation was determined by dividing the aggregate amount of the repayment of
the $7.5 million IGFH Note and the $7.5 million repayment of parent indebtedness
by the IPO price of $12.50 per share.
The pro forma results are not necessarily indicative of what actually
would have occurred if these transactions had been in effect for the entire
periods presented. In addition, they are not intended to be a projection of
future results.
F-14
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
4. Investments
Investments are summarized as follows:
<TABLE>
Unrealized
------------------------------
Cost or Estimated
Amortized Cost Gain Loss Market Value
-------------- ---- ---- ------------
<CAPTION>
<S> <C> <C> <C> <C>
December 31, 1996 Fixed maturities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 55,034 $ 343 $ (233) $ 55,144
Foreign governments 1,515 0 (30) 1,485
Obligations of states and political subdivisions 2,945 11 (4) 2,952
Corporate securities 67,545 977 (422) 68,100
------ --- ----- ------
Total Fixed Maturities 127,039 1,331 (689) 127,681
------- ----- ----- -------
Equity Securities:
Common stocks 25,734 2,884 (698) 27,920
Short-term investments 9,565 0 0 9,565
Real estate 466 0 0 466
Mortgage loans 2,430 0 0 2,430
Other loans 75 0 0 75
-- - - --
Total Investments $ 165,309 $ 4,215 $ (1,387) $ 168,137
======= ===== ======= =======
December 31, 1995 Fixed maturities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 10,978 $ 63 $ (1) $ 11,040
Obligations of states and political subdivisions 1,470 57 (1) 1,526
Corporate securities 364 1 0 365
--- - - ---
Total Fixed Maturities 12,812 121 (2) 12,931
------ --- --- ------
Equity Securities:
Preferred stocks 100 1 (4) 97
Common stocks 4,318 108 (292) 4,134
----- --- ----- -----
4,418 109 (296) 4,231
----- --- ----- -----
Short-term investments 5,283 0 0 5,283
Real estate 487 0 0 487
Mortgage loans 2,920 0 0 2,920
Other loans 50 0 0 50
-- - - --
Total Investments $ 25,970 $ 230 $ (298) $ 25,902
====== === ===== ======
</TABLE>
At December 31, 1996, 90.2% of the Company's fixed maturities were
considered investment grade by The Standard & Poors Corporation or Moody's
Investor Services, Inc. Securities with quality ratings Baa and above are
considered investment grade securities. In addition, the Company's investments
in fixed maturities did not contain any significant geographic or industry
concentration of credit risk.
F-15
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
The amortized cost and estimated market value of fixed maturities at
December 31, 1996, by contractual maturity, are shown in the table which
follows. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
penalty:
Amortized Estimated
Cost Market Value
---------------- -----------------
Maturity:
Due in 1 year or less $ 6,412 $ 6,423
Due after 1 year through 5 years 70,848 71,086
Due after 5 years through 10 years 43,109 43,404
Due after 10 years 6,670 6,768
---------------- -----------------
Total $ 127,039 $ 127,681
================ =================
Gains and losses realized on sales of investments in fixed maturities
are as follows:
1996 1995 1994
---------------- --------------- ----------------
Proceeds from sales $ 40,153 $ 7,903 $ 4,083
Gross gains realized 92 106 119
Gross losses realized 561 291 29
Real Estate is reported net of accumulated depreciation of $164 and
$143 for 1996 and 1995, respectively. Investments in a single issuer greater
than 10% of stockholders' equity at December 31, 1996 are as follows:
Description Fixed Maturities
- ---------------------------------------- --------------------
United States Treasury Notes $ 26,318
Federal National Mortgage Association $ 14,885
--------------------
$ 41,203
--------------------
F-16
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
An analysis of net investment income for the years ended December 31,
1996, 1995, and 1994 follows:
1996 1995 1994
-------------- -------------- ------------
Fixed maturities $ 5,714 $ 534 $ 470
Equity securities 756 256 677
Cash and short-term investments 281 194 99
Real Estate 51 52 273
Mortgage Loans 207 231 132
Other 25 270 96
-------------- -------------- ------------
Total Investment Income 7,034 1,537 1,747
Investment Expenses (301) (364) (506)
-------------- -------------- ------------
Net Investment Income $ 6,733 $ 1,173 $ 1,241
-------------- -------------- ------------
In 1992, PGIC acquired a hotel property through a deed in lieu of
foreclosure on a mortgage it held in the amount of $2,985. In 1993, the property
was renovated and changed to a Comfort Inn. In June 1994, the property was sold
for net proceeds of $4,166, resulting in a gain on sale of $147. Upon the sale,
PGIC issued an 8% mortgage loan due in the year 2001 in the amount of $3,000. It
calls for monthly principal payments of $10 plus interest. All payments on the
mortgage were current at December 31, 1996.
Investments with a market value of $23,419 and $6,410 (amortized cost
of $22,749 and $6,296) as of December 31, 1996 and 1995, respectively, were on
deposit in the United States and Canada. The deposits are required by law to
support certain reinsurance contracts, performance bonds and outstanding loss
reserves on assumed business.
Fixed maturities and short-term investments with a market value of
$1,539 (amortized cost of $1,571) as of December 31, 1996 were pledged as
collateral on an unused letter of credit of $1,500 issued to a ceding reinsurer.
5. Deferred Policy Acquisition Costs
Policy acquisition costs are capitalized and amortized over the life
of the policies. Policy acquisition costs are those costs directly related to
the issuance of insurance policies including commissions, premium taxes, and
underwriting expenses net of reinsurance commission income on such policies.
Policy acquisition costs both acquired and deferred, and the related
amortization charged to income were as follows:
F-17
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
1996 1995 1994
------------ ------------ ----------
Balance, Beginning of year $ 2,379 $ 1,479 $ 752
Deferred policy acquisition
costs purchase in the
Superior acquisition 7,925 0 0
Costs deferred during year 27,657 8,050 5,579
Amortization during year (25,161) (7,150) (4,852)
------------ ------------ ----------
Balance, end of year $ 12,800 $ 2,379 $ 1,479
------------ ------------ ----------
6. Property and Equipment
Property and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
1996 Cost Depreciation 1996 Net 1995 Net
---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Land $ 226 $ 0 $ 226 $ 226
Buildings 4,342 (1,186) 3,156 3,209
Office furniture and equipment 2,023 (999) 1,024 610
Automobiles 20 (7) 13 1
Computer equipment 5,535 (1,817) 3,718 1,456
---------------- ---------------- -------------- ---------------
$ 12,146 $ (4,009) $ 8,137 $ 5,502
================ =============== ============== ===============
</TABLE>
Accumulated depreciation at December 31, 1995 was $2,226. Depreciation
expense related to property and equipment for the years ended December 31, 1996,
1995 and 1994 were $1,783, $637, and $374, respectively.
F-18
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
7. Other Assets
Other assets at December 31, 1996 includes the following intangible
assets:
Accumulated Amortization
Cost Amortization Expense
----------------- ----------------- ----------------
Goodwill $ 2,217 $ 95 $ 95
Deferred debt costs 1,386 154 154
Organization costs 1,689 162 162
----------------- ----------------- ----------------
$ 5,292 $ 411 $ 411
----------------- ----------------- ----------------
No such amounts existed at December 31, 1995.
8. Line of Credit
At December 31, 1996, IGF maintained a revolving bank line of credit in
the amount of $7,000. At December 31, 1996 and 1995, the outstanding balance was
$0 and $5,811, respectively. Interest on this line of credit was at the New York
prime rate (8.25% at December 31, 1996) plus 0.25% adjusted daily. This line is
collateralized by the crop-related uncollected premiums, reinsurance recoverable
on paid losses, Federal Crop Insurance Corporation (FCIC) annual settlement, and
a first lien on the real estate owned by IGF. The line requires IGF to maintain
its primary banking relationship with the issuing bank, limits dividend payments
and capital purchases and requires the maintenance of certain financial ratios.
At December 31, 1996, IGF was in compliance with all covenants associated with
the line, except the covenant pertaining to certain investments as a percentage
of total admitted assets, for which IGF obtained a waiver.
The weighted average interest rate on the line of credit was 8.6%,
9.7%, and 8.1% during December 31, 1996, 1995, and 1994, respectively.
9. Term Debt
The term debt, with an outstanding principal balance of $48,000,
matures on April 30, 2002, and will be repaid in 11 consecutive semiannual
installments, the first of which will occur on the first anniversary of the
closing date. The first installments of principal repayments will be $3,128 and
$2,886 in 1997, respectively, with the remaining annual installments over the
term of the debt to be paid as follows: 1998-$6,494; 1999-$7,938; 2000-$9,742;
2001- $11,612; and 2002-$6,200. Interest on the term debt is payable quarterly
at LIBOR plus 2.75%. In 1996, the Company entered into an interest rate swap
agreement to protect the Company against interest rate volatility. As a result,
the Company fixed its interest rate on the term debt at 8.31% through November
1996, 8.85% through January 1997, 9.08% through April 1997, 9.24% through July
1997, and 8.80% through October 1999. The term debt is collateralized by a
pledge of all of the tangible and intangible assets of GGS Holdings, including
all of the outstanding shares of GGS, and by a pledge of all of the tangible and
intangible assets of GGS, including all of the outstanding shares of capital
stock of PGIC and Superior.
F-19
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
As of December 31, 1996, GGS was in default of six covenants in the
term debt. The first covenant required Pafco and Superior to maintain a Combined
Ratio of statutory net premiums written to surplus of 3:1. The commercial bank
lenders under the term debt have amended the agreement to cure this default.
While there can be no assurance that GGS will have in the future sufficient cash
flow after satisfaction of its debt service requirements to permit GGS to infuse
sufficient capital into its insurance subsidiaries to permit them to maintain a
ratio of net premiums written to surplus not in excess of 3:1, the Company
believes that it or GGS will be able either to contribute additional capital to
PGIC and Superior or, if necessary, to obtain reinsurance, reduce premium
writings, or obtain additional financing in order to permit them to satisfy this
covenant in future years.
The second covenant violation relates to insufficient funds posted by
an affiliate reinsurer to cover its obligations under reinsurance treaties with
Pafco. The affiliate has posted sufficient funds in 1997, and the Company does
not expect future violations of this covenant to occur. The commercial bank
lenders under the term debt have agreed that this violation has been cured. The
third violation relates to Superior's risk-based capital ratio being less than
300% due to growth in premium writings. The commercial lenders under the term
debt have amended the agreement to cure this default.
10. Unpaid Losses and Loss Adjustment Expenses
Activity in the liability for unpaid losses and loss adjustment
expenses is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- --------------
<S> <C> <C> <C>
Balance at January 1 $ 59,421 $ 29,269 $ 54,143
Less reinsurance recoverables 37,798 12,542 36,891
--------------- --------------- --------------
Net balance at January 1 21,623 16,727 17,252
--------------- --------------- --------------
Reserves acquired in connection with
the Superior acquisition 44,423 0 0
--------------- --------------- --------------
Incurred related to:
Current year 138,618 35,184 26,268
Prior years (1,509) 787 202
--------------- --------------- --------------
Total incurred 137,109 35,971 26,470
--------------- --------------- --------------
Paid related to:
Current year 102,713 21,057 16,647
Prior years 28,182 10,018 10,348
--------------- --------------- --------------
Total paid 130,895 31,075 26,995
--------------- --------------- --------------
Net balance at December 31 72,260 21,623 16,727
Plus reinsurance recoverables 29,459 37,798 12,542
--------------- --------------- --------------
Balance at December 31 $ 101,719 $ 59,421 $ 29,269
=============== =============== ==============
</TABLE>
F-20
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
The foregoing reconciliation shows that the (redundancies) deficiencies
of $(1,509), $787, and $202 in the December 31, 1995, 1994 and 1993 reserves,
respectively, emerged in the following year. These (redundancies) deficiencies
resulted from (lower) higher than anticipated losses resulting from a change in
settlement costs relating to those estimates.
The anticipated effect of inflation is implicitly considered when
estimating liabilities for losses and LAE. While anticipated price increases due
to inflation are considered in estimating the ultimate claim costs, the increase
in average severities of claims is caused by a number of factors that vary with
the individual type of policy written. Future average severities are projected
based on historical trends adjusted for implemented changes in underwriting
standards, policy provisions, and general economic trends. Those anticipated
trends are monitored based on actual development and are modified if necessary.
Liabilities for loss and loss adjustment expenses have been established
when sufficient information has been developed to indicate the involvement of a
specific insurance policy. In addition, a liability has been established to
cover additional exposure on both known and unasserted claims. These liabilities
are reviewed and updated continually.
11. Income Taxes
The Company files a consolidated federal income tax return with its
wholly owned subsidiaries. GGS Holdings files a consolidated tax return with its
wholly owned subsidiaries. Intercompany tax sharing agreements between the
Company and its wholly owned subsidiaries and GGS Holdings and its wholly owned
subsidiaries provide that income taxes will be allocated based upon separate
return calculations in accordance with the Internal Revenue Code of 1986, as
amended. Intercompany tax payments are remitted at such times as estimated taxes
would be required to be made to the Internal Revenue Service.
A reconciliation of the differences between federal tax computed by
applying the federal statutory rate of 35% in 1996 and 34% in 1995 and 1994 to
income before income taxes and the income tax provision is as follows:
1996 1995 1994
--------- --------- ----------
Computed income taxes at statutory rate $ 8,296 $ 2,531 $ 468
Dividends received deduction (158) (54) (30)
Tax-exempt interest (270) (32) (36)
Change in valuation allowance (23) (237) (1,492)
Change in tax rate (14) 0 0
Other 215 414 372
--------- --------- ----------
Income Taxes $ 8,046 $ 2,622 $ (718)
--------- --------- ----------
F-21
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
State income taxes for 1996, 1995 and 1994 are not significant.
Therefore, state income taxes have been recorded in general and administrative
expenses and not as part of income taxes.
The net deferred tax asset at December 31, 1996 and 1995 is comprised
of the following:
1996 1995
------------ ------------
Deferred tax assets:
Unpaid losses and loss adjustment expenses $ 2,705 $ 422
Unearned premiums 5,061 764
Allowance for doubtful accounts 518 315
Unrealized losses on investments 0 23
Net operating loss carryforwards 328 457
Other 685 411
------------ ------------
9,297 2,392
Valuation allowance 0 23
------------ ------------
Net deferred tax asset 9,297 2,369
------------ ------------
Deferred tax liabilities:
Deferred policy acquisition costs (4,480) (809)
Unrealized gains on investments (1,224) 0
Other (264) (139)
------------ ------------
(5,968) (948)
------------ ------------
Net deferred tax asset $ 3,329 $ 1,421
============ ============
The Company is required to establish a "valuation allowance" for any
portion of its deferred tax assets which is unlikely to be realized. No
valuation allowance was established as of December 31, 1996 since management
believes it is more likely than not that the Company will realize the benefit of
its deferred tax assets through utilization of such amounts under the carryback
rules and through future taxable income.
F-22
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
As of December 31, 1996, the Company has unused net operating loss
carryovers available as follows:
Years ending not later than December 31, Amount
- ---------------------------------------------- ---------------
2000 $ 811
2002 126
---------------
Total $ 937
===============
Federal income tax attributed to the Company has been examined through
1993. In the opinion of management, the Company has adequately provided for the
possible effects of future assessments related to prior years.
12. Leases
The Company has certain commitments under long-term operating leases
for a branch office and sales offices for Superior Insurance Company. Rental
expense under these commitments was $751 for 1996. Future minimum lease payments
required under these noncancellable operating leases are as follows:
1997 $ 928
1998 466
1999 373
2000 62
2001 and thereafter 0
--------------
Total $ 1,829
==============
13. Reinsurance
The Company limits the maximum net loss that can arise from a large
risk, or risks in concentrated areas of exposure, by reinsuring (ceding) certain
levels of risks with other insurers or reinsurers, either on an automatic basis
under general reinsurance contracts known as "treaties" or by negotiation on
substantial individual risks. Such reinsurance includes quota share, excess of
loss, stop-loss and other forms of reinsurance on essentially all property and
casualty lines of insurance. In addition, the Company assumes reinsurance on
certain risks. The Company remains contingently liable with respect to
reinsurance, which would become an ultimate liability of the Company in the
event that such reinsuring companies might be unable, at some later date, to
meet their obligations under the reinsurance agreements.
F-23
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
Approximately 66% of amounts recoverable from reinsurers are with the
FCIC, a branch of the federal government. Another 28% of recoverable amounts are
with Granite Re, a foreign corporation, which has not applied for an A.M. Best
rating. An additional 5% of uncollateralized recoverable amounts are with
companies which maintain an A.M. Best rating of at least A+. Company management
believes amounts recoverable from reinsurers are collectible. Amounts
recoverable from reinsurers relating to unpaid losses and loss adjustment
expenses were $29,459, $37,798, and $12,542 as of December 31, 1996, 1995, and
1994, respectively. These amounts are reported gross of the related reserves for
unpaid losses and loss adjustment expenses in the accompanying Consolidated
Balance Sheets.
On April 29, 1996, PGIC and IGF entered into a 100% quota share
reinsurance agreement, whereby all of IGF's nonstandard automobile business from
1996 and forward was ceded to PGIC effective January 1, 1996.
On April 29, 1996, PGIC retroactively ceded all of its commercial
business relating to 1995 and previous years to Granite Re, with an effective
date of January 1, 1996. Amounts ceded for outstanding losses and loss
adjustment expenses and unearned premiums were approximately $3,519 and $2,380,
respectively. No gain or loss was recognized in 1996 on the transaction. On this
date, PGIC also entered into a 100% quota share reinsurance agreement with
Granite Re, whereby all of PGIC's commercial business from 1996 and forward was
ceded to Granite Re effective January 1, 1996. (See Note 17.)
F-24
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
Reinsurance activity for 1996, 1995, and 1994, which includes
reinsurance with related parties, is summarized as follows:
<TABLE>
<CAPTION>
Direct Assumed Ceded Net
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
1996
Premiums written $ 298,596 $ 6,903 $ (95,907) $ 209,592
Premiums earned 279,061 6,903 (94,205) 191,759
Incurred losses and loss adjustment 223,879 4,260 (91,030) 137,109
expenses
Commission expenses (income) 44,879 3,663 (46,716) 1,826
1995
Premiums written $ 123,381 $ 1,253 $ (71,187) $ 53,447
Premiums earned 116,860 1,256 (68,475) 49,641
Incurred losses and loss adjustment
expenses 125,382 2,839 (92,250) 35,971
Commission expenses (income) 17,177 174 (27,092) (9,741)
1994
Premiums written $ 102,178 $ 956 $ (67,995) $ 35,139
Premiums earned 96,053 1,308 (65,235) 32,126
Incurred losses and loss adjustment
expenses 57,951 1,588 (33,069) 26,470
Commission expenses (income) 19,619 48 (24,174) (4,507)
</TABLE>
The Company and its subsidiaries have entered into transactions with
various related parties including transactions with Goran, and its affiliates,
Symons International Group, Ltd. (SIG Ltd.), Goran's parent, Granite Insurance
Company (Granite), and Granite Reinsurance Company, Ltd. (Granite Re), Goran's
subsidiaries.
F-25
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
The following balances were outstanding at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
Investments in and advances to related parties:
Nonredeemable, nonvoting preferred stock of Granite $ 702 $ 702
Secured notes receivable from related parties 0 1,355
Unsecured mortgage loan from director and officer 278 278
Due from directors and officers 172 199
Other receivables from related parties 0 418
--------------- --------------
$ 1,152 $ 2,952
=============== ==============
Payable to affiliates:
Loan and related interest payable to Goran $ 0 $ 2,232
Loan and related interest payable to Granite Re 0 3,733
Other payable to Goran 350 500
Other payables to related parties 16 9
--------------- --------------
$ 366 $ 6,474
=============== ==============
</TABLE>
F-26
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
The following transactions occurred with related parties in the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- --------------- --------------
<S> <C> <C> <C>
Management fees charges by Goran $ 139 $ 414 $ 494
Reinsurance under various treaties, net:
Ceded premiums earned 5,463 5,235 (73)
Ceded losses and loss adjustment expenses incurred 5,168 2,612 0
Ceded commissions 2,620 1,142 0
Consulting fees charged by various related parties 180 26 75
Interest charged by Goran 196 208 188
Dividend income from Granite Re 0 0 18
Interest charged by Granite Re 385 346 312
</TABLE>
The unsecured mortgage loan to the Chairman and CEO of the Company was
repaid in full in February 1997.
Amounts due from directors and officers of the Company bear interest at
the 180-day Treasury bill rate payable semiannually. Loan principal is payable
on demand.
The loans payable, including accrued interest, to Goran and Granite Re
at December 31, 1995, were repaid in full in 1996 from the proceeds of the
offering.
15. Stockholders' Equity
On July 29, 1996, the Board of Directors approved an increase in the
authorized common stock of the Company from 1,000 shares to 100,000,000 shares.
The common stock remains no par value. On July 29, 1996, the Board approved a
7,000-for-1 stock split of the Company's issued and outstanding shares. All
share and per share amounts have been restated to retroactively reflect the
stock split. On July 29, 1996, the Board of Directors authorized the issuance of
50,000,000 shares of preferred stock. No shares of preferred stock have been
issued.
16. Effects of Statutory Accounting Practices and Dividend Restrictions
At December 31, 1996 and 1995, PGIC's statutory capital and surplus was
$18,112 and $11,875, respectively, and IGF's statutory capital and surplus was
$29,412 and $9,219, respectively. The minimum regulatory requirement for capital
and surplus is $1,250. The Indiana statute allows 10% of surplus as regards
policyholders or 100% of net income, whichever is greater, to be paid as
dividends only from earned surplus. Statutory requirements place limitations on
the amount of funds which can be remitted to the Company from PGIC and to PGIC
from IGF.
F-27
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
Subsequent to Board of Directors and regulatory approval, IGF declared
and paid in April 1996 and December 1995 extraordinary dividends to PGIC in the
amounts of $11 million and $2 million on the 2,494,000 shares of convertible
preferred stock owned by PGIC. In December 1995, upon Board of Directors of PGIC
and regulatory approval, PGIC declared and paid to the Company a $1.5 million
extraordinary dividend on the common stock owned by the Company.
At December 31, 1996, the Superior entities' statutory capital and
surplus was $57,121. In the consent order approving the Acquisition, the Florida
Department has prohibited Superior from paying any dividends for four years
without the prior written approval of the Florida Department.
17. Regulatory Matters
PGIC and IGF, domiciled in Indiana, prepare their statutory financial
statements in accordance with accounting practices prescribed or permitted by
the Indiana Department of Insurance (IDOI). The Superior entities, domiciled in
Florida, prepare their statutory financial statements in accordance with
accounting practices prescribed or permitted by the Florida Department of
Insurance (FDOI). Prescribed statutory accounting practices include a variety of
publications of the NAIC, as well as state laws, regulations, and general
administrative rules. Permitted statutory accounting practices encompass all
accounting practices not so prescribed.
IGF received written approval through December 31, 1996 from the IDOI
to reflect its business transacted with the FCIC as a 100% cession with any net
underwriting results recognized in ceding commissions for statutory accounting
purposes, which differs from prescribed statutory accounting practices. As of
December 31, 1996, that permitted transaction had no effect on statutory surplus
or net income. The underwriting profit results of the FCIC business, net of
reinsurance of $12,277, $9,653, and $3,257, are netted with policy acquisition
and general and administrative expenses for the years ended December 31, 1996,
1995, and 1994, respectively, in the accompanying Consolidated Statements of
Earnings.
PGIC received approval from the IDOI to record its quota share
reinsurance agreement with Granite Re for its commercial business as reinsurance
effective January 1, 1996 for statutory accounting purposes, which differs from
prescribed statutory practices. SAP prescribed by the IDOI require certain
administrative matters to be completed by an insurance company to recognize a
reinsurance agreement as of its effective date. As of December 31, 1996, these
permitted transactions increased statutory surplus by $512 over what it would
have been had prescribed accounting practices been followed.
The NAIC is considering the adoption of a recommended statutory
accounting standard for crop insurers, the impact of which is uncertain since
several methodologies are currently being examined. Although the Indiana
Department has permitted the Company to continue for its statutory financial
statements through December 31, 1996 its practice of recording its MPCI business
as 100% ceded to the FCIC with net underwriting results recognized in ceding
commissions, the Indiana Department has indicated that in the future it will
require the Company to adopt the MPCI accounting practices recommended by the
NAIC or any similar practice adopted by the Indiana Department. Since such a
standard would be adopted industry-wide for crop insurers, the Company would
also be required to conform its future GAAP financial statements to reflect the
new MPCI statutory accounting methodology and to restate all historical GAAP
financial statements consistently with this methodology for comparability. The
Company cannot predict what accounting methodology will eventually be
implemented or when the Company will be required to adopt such methodology. The
Company anticipates that any such new crop accounting methodology will not
affect GAAP net earnings.
F-28
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
The NAIC has promulgated risk-based capital (RBC) requirements for
property/casualty insurance companies to evaluate the adequacy of statutory
capital and surplus in relation to investment and insurance risks, such as asset
quality, asset and liability matching, loss reserve adequacy and other business
factors. The RBC information is used by state insurance regulators as an early
warning tool to identify, for the purpose of initiating regulatory action,
insurance companies that potentially are inadequately capitalized. In addition,
the formula defines new minimum capital standards that will supplement the
current system of fixed minimum capital and surplus requirements on a
state-by-state basis. Regulatory compliance is determined by a ratio (the
"Ratio") of the enterprise's regulatory total adjusted capital, as defined by
the NAIC, to its authorized control level RBC, as defined by the NAIC.
Generally, a Ratio in excess of 200% of authorized control level RBC requires no
corrective actions by PGIC, IGF or regulators. As of December 31, 1996, IGF,
PGIC and the Superior entities had Ratios that were in excess of the minimum RBC
requirements.
The NAIC currently has a project under way to codify SAP, as existing
SAP does not address all accounting issues and may differ from state to state.
Upon completion, the Codification is expected to replace prescribed or permitted
SAP in each state as the new comprehensive statutory basis of accounting for
insurance companies. The final format of the Codification is uncertain at this
time, yet implementation could be required as early as January 1, 1998. Due to
the project's uncertainty, the Company has not yet quantified the impact any
such changes would have on the statutory capital and surplus or results of
operations of the Company's insurance subsidiaries. The impact of adopting this
new comprehensive statutory basis of accounting is, however, expected to
materially impact statutory capital and surplus.
18. Commitments and Contingencies
The Company, and its subsidiaries, are named as defendants in various
lawsuits relating to their business. Legal actions arise from claims made under
insurance policies issued by the subsidiaries. These actions were considered by
the Company in establishing its loss reserves. The Company believes that the
ultimate disposition of these lawsuits will not materially affect the Company's
operations or financial position.
IGF is responsible for the administration of a run-off book of
business. FCIC has requested that IGF take responsibility for the claim
liabilities under its administration of these policies, and IGF has requested
reimbursement of certain expenses from the FCIC with respect to this run-off
activity. It is the Company's opinion, and that of its legal counsel, that there
is no material liability on the part of the Company for claim liabilities of
other companies under IGF's administration.
The increase in number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. The Company recognizes its obligations for guaranty fund assessments
when it receives notice that an amount is payable to a guaranty fund. The
ultimate amount of these assessments may differ from that which has already been
assessed.
F-29
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
The Company received a commitment from a commercial bank which provided
funds to certain executives and a director of the Company to purchase 69,500
shares in the Directed Share Program in the Company's Offering. The Company
agreed to guarantee 100% of the aggregate principal amount, including unpaid
accrued interest, extended by the commercial bank under this commitment. The
amount of the Company's guarantee under this commitment is approximately $869.
The Company has entered into a purchase agreement to acquire an office
building in Des Moines, Iowa, to be used as its crop insurance division home
office. The purchase price was $2.6 million, of which $2.4 million was escrowed
on February 1, 1997. The terms include a floating closing date whereby the
transaction will close on the earlier of February 1, 1998 or thirty days after
the closing of the Company's currently occupied home office building, also
located in Des Moines. The purchase of the new building is not contingent on the
sale of the current building.
19. Supplemental Cash Flow Information
Cash paid for interest and income taxes are summarized as follows:
1996 1995 1994
------------- --------------- --------------
Cash paid for interest $ 5,178 $ 553 $ 685
Cash paid for income taxes,
net of refunds $ 9,825 $ 1,953 $ 166
During 1994, IGF exchanged 700,000 shares of Granite Reinsurance
Company, Ltd. stock for 9,800 shares of Granite Insurance Company stock,
recording no gain or loss. In addition, PGIC exchanged an investment in real
estate for a mortgage loan of $3,000 plus cash of $1,166.
During 1996, the Company contributed the stock of PGIC and certain
assets of the Company totaling $17,186 to GGS Holdings in exchange for a 52%
ownership interest in GGS Holdings. In addition, Goldman Funds received a
minority interest share of $18,425 in GGS Holdings for its $21,200 contribution,
resulting in a $2,775 increase to additional paid-in capital from the sale of
PGIC common stock and certain assets.
20. Disclosures About Fair Values of Financial Instruments
The following discussion outlines the methodologies and assumptions
used to determine the estimated fair value of the Company's financial
instruments. Considerable judgment is required to develop these fair values and,
accordingly, the estimates shown are not necessarily indicative of the amounts
that would be realized in a one-time, current market exchange of all of the
Company's financial instruments.
a. Fixed Maturity and Equity Securities: Fair values for fixed
maturity and equity securities are based on market values
obtained from the NAIC Securities Valuation Office. Such
values approximate quoted market prices from published
information.
b. Mortgage Loan: The estimated fair value of the mortgage loan
was established using a discounted cash flow method based on
credit rating, maturity and future income when compared to the
expected yield for mortgages having similar characteristics.
The estimated fair value of the mortgage loan was $2,360 at
December 31, 1996.
F-30
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
c. Short-term Investments, and Cash and Cash Equivalents: The
carrying value for assets classified as short-term
investments, and cash and cash equivalents in the accompanying
Consolidated Balance Sheets approximates their fair value.
d. Short-term and Long-term Debt: Fair values for long-term debt
issues are estimated using discounted cash flow analysis based
on the Company's current incremental borrowing rate for
similar types of borrowing arrangements. In 1996, the rate on
the Company's term debt approximated 8.38%, below the current
rate of 8.41% for similar types of borrowing arrangements. The
estimated fair value of the term debt was $49,047 at December
31, 1996. For short-term debt, the carrying value approximates
fair value.
e. Advances to Related Parties and Payables to Affiliates: It is
not practicable to determine the fair value of the advances to
related parties or the payables to affiliates as of December
31, 1996 and 1995, because these are related party obligations
and no comparable fair value measurement is available.
21. Segment Information
The Company has two business segments: Nonstandard automobile and Crop
insurance. The Nonstandard automobile segment offers personal nonstandard
automobile insurance coverages through a network of independent general
agencies. These products are sold by PGIC in seven states, Superior in eight
states, and IGF in six states. Effective in the first quarter of 1996, all
nonstandard automobile business will be retained in PGIC (see Note 13). The Crop
segment writes MPCI and crop hail insurance in 31 states through independent
agencies with its primary concentration in the Midwest. Activity which is not
included in the major business segments is shown as "Corporate and Other."
"Corporate and Other" includes operations not directly related to the
business segments and unallocated corporate items (i.e., corporate investment
income, interest expense on corporate debt and unallocated overhead expenses).
Identifiable assets by business segment are those assets in the
Company's operations in each segment. Corporate and other assets are principally
cash, short-term investments, related-party assets, intangible assets, and
property and equipment. Capital expenditures are reported exclusive of the
Acquisition.
F-31
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
Segment information for 1994 through 1996 is as follows (certain
information for 1995 and 1994 is not available by segment due to general use by
all segments of corporate assets):
<TABLE>
Year Ended December 31,
1996 1995 1994
-------------- --------------- ---------------
<CAPTION>
<S> <C> <C> <C>
Revenue:
Nonstandard automobile $ 181,799 $ 36,363 $ 27,784
Crop 24,865 12,830 4,873
Corporate and other 99 3,447 2,183
-------------- --------------- ---------------
Total Revenue $ 206,763 $ 52,640 $ 34,840
============== =============== ===============
Earnings (loss) before taxes and
minority interest:
Nonstandard automobile $ 7,434 $ (1,989) $ 772
Crop 17,685 11,040 2,152
Corporate and other (1,416) (1,611) (1,539)
-------------- --------------- ---------------
Total earnings (loss) before taxes and
minority interest $ 23,703 $ 7,440 $ 1,385
============== =============== ===============
Identifiable assets:
Nonstandard automobile $ 260,332
Crop 72,916
Corporate and other 6,550
--------------
Total identifiable assets: $ 339,798
==============
Depreciation and amortization
Nonstandard automobile $ 1,568
Crop 574
Corporate and other 52
--------------
Total depreciation and amortization $ 2,194
==============
Capital expenditures:
Nonstandard automobile $ 2,058
Crop 1,676
Corporate and other 0
--------------
Total capital expenditures $ 3,734
==============
</TABLE>
F-32
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
22. Stock Option Plans
On November 1, 1996, the Company adopted the SIG 1996 Stock Option Plan
(the "SIG Stock Option Plan"). The SIG Stock Option Plan provides the Company
authority to grant nonqualified stock options and incentive stock options to
officers and key employees of the Company and its subsidiaries and nonqualified
stock options to nonemployee directors of the Company and Goran. A total of
1,000,000 shares of common stock have been reserved for issuance under the SIG
Stock Option Plan. On November 1, 1996, the Company issued 830,000 stock options
to the Company's nonemployee directors and certain Goran directors and certain
officers, and certain other key employees of the Company and Goran. The options
were granted at an exercise price equal to the Offering price of the Company's
common stock. The Company has granted (i) options to purchase 20,000 shares of
common stock to the nonemployee directors of the Company, (ii) options to
purchase 791,000 shares of common stock to officers and key employees of the
Company and the subsidiaries, (iii) options to purchase 6,000 shares of common
stock to certain nonemployee directors of Goran and (iv) options to purchase
13,000 shares of common stock to certain employees of Goran and its subsidiaries
who have provided valuable services or assistance for the benefit of the Company
and the subsidiaries. The options granted to the Company's Chairman (375,000
shares) vest and become exercisable in full on the first anniversary of the
grant date. All of the remaining outstanding stock options vest and become
exercisable in six equal installments on the first, second and third
anniversaries of the date of grant.
The Board of Directors of GGS Holdings adopted the GGS Management
Holdings, Inc. 1996 Stock Option Plan (the "GGS Stock Option Plan"), effective
as of April 30, 1996. A maximum of 10% of the issued and outstanding shares of
GGS Holding's common stock (on a fully diluted basis assuming exercise in full
of all options) may be made the subject of options granted under the GGS Stock
Option Plan. A total of 111,111 shares of common stock of GGS Holdings have
actually been reserved for issuance under the GGS Stock Option Plan, which
authorizes the granting of nonqualified and incentive stock options to such
officers and other key employees as may be designated by the Board of Directors
of GGS Holdings. During 1996, 55,972 options have been granted under the GGS
Stock Option Plan. Stock options granted under the GGS Stock Option Plan will be
exercisable at such times and at such exercise prices as the Board of Directors
of GGS Holdings shall determine, but in any event not prior to the earlier of
(i) an initial public offering of GGS Holdings, and (ii) a GGS Holdings Sale, as
defined, and not later than ten years from the date of the grant. Options
granted under the GGS Stock Option Plan vest at a rate of 20% per year for five
years after the date of the grant. The exercise price of options granted as of
April 30, 1996 is, with respect to 50% of the shares subject to each such
option, $44.17 per share. The exercise price per share for the remaining 50% is
$44.17, subject to a compound annual increase in the exercise price of 10% for
the duration of the vesting period. The exercise price of any options granted
under the GGS Stock Option Plan after April 30, 1996, will be subject to a
similar formula, with 50% of the shares subject to any such option having an
exercise price determined by the Board of Directors in its discretion, and the
other 50% having an exercise price which increases on each anniversary of the
date of the grant for the duration of the vesting period. No option granted
under the GGS Stock Option Plan is transferable by the option holder other than
by the laws of descent and distribution. Shares received upon exercise of such
an option are not transferable, except as provided in the Stockholder Agreement
among the Company and the Goldman Funds.
F-33
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
At December 31, 1996, the Company applied APB Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its stock option plans in the
accompanying Statement of Earnings. Had compensation cost for the Company's
stock option plan been determined consistent with FASB Statement No. 123, the
Company's net earnings and earnings per share would have been reduced to the pro
forma amounts indicated below:
1996
----------------------------------------
As Reported Pro Forma
----------------- -----------------
Net earnings $13,256 $13,021
======= =======
Net earnings per share $1.76 $1.73
===== =====
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used: no dividend yield for all years; expected volatility of 40%
for the SIG Stock Option Plan and no percentage for the GGS Stock Option Plan,
since the GGS Holdings stock is privately held; risk-free interest rate of 6.0%
to 6.5% for the SIG Stock Option Plan and 6.4% for the GGS Stock Option Plan;
and an expected life of two to four years for the SIG Stock Option Plan and five
years for the GGS Stock Option Plan.
23. Quarterly Financial Information (unaudited):
Quarterly financial information is as follows:
<TABLE>
Quarters
----------------------------------------------------------------------------
First Second Third Fourth Total
--------------- -------------- --------------- --------------- ---------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
1996
Gross written premiums $ 41,422 $ 105,528 $ 71,813 $ 86,736 $ 305,499
Net earnings 1,586 2,718 4,589 4,363 13,256
Earnings per share 0.22 0.39 0.66 0.49 1.76
1995
Gross written premiums $ 28,272 $ 67,487 $ 16,978 $ 11,897 $ 124,634
Net earnings 1,066 940 1,464 1,351 4,821
Earnings per share 0.15 0.14 0.21 0.19 0.69
</TABLE>
F-34
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
As is customary in the crop insurance industry, insurance company
participants in the FCIC program receive more precise financial results from the
FCIC in the fourth quarter based upon business written on spring-planted crops.
On the basis of FCIC-supplied financial results, IGF recorded, in the fourth
quarter, an additional underwriting gain, net of reinsurance, on its FCIC
business of $5,572 during 1996 and $3,139 during 1995.
24. Subsequent Events (Unaudited):
The Company is currently negotiating the 1998 Standard Reinsurance
Agreement with the FCIC. The current government proposal is to reduce the MPCI
Expense Reimbursement to 24.5% and reduce the profit sharing arrangement. The
negotiations are on-going and the ultimate results cannot be determined at this
time. There can be no assurance that the Company will negotiate terms for the
1998 Standard Reinsurance Agreement which are favorable to the Company.
During the first half of 1997, and most noticeably in the second quarter of
1997, the Company, as part of its efforts to reduce costs and combine the
operations of the two nonstandard automobile insurance companies, has combined
the claims settlement practices as well as the reserving philosophies of
Superior and Pafco. Superior had historically provided higher case reserves and
lower IBNR levels than Pafco while paying claims in a manner where such payments
were generally less than applicable reserves. Pafco had historically carried
adequate reserves while paying claims in a manner where such payments were
generally greater than applicable reserves. In connection with this change in
claims management philosophy, the Company will record additional Loss and LAE
Reserves, relating primarily to operations at Pafco, resulting in an after tax
charge to earnings of approximately $1.8 million or $0.17 per share in the
second quarter of 1997. While the Company believes these actions are necessary,
the establishment and monitoring of reserve levels is a highly subjective
process involving numerous assumptions and estimates. Therefore, actual results
may ultimately differ from current estimates.
The effects of these additional Loss and LAE Reserves on the Company's
historical and pro forma results of operations and financial condition as of and
for the six months ended June 30, 1997 follows. The following amounts have been
credited for the minority interest owner's share of the after tax effects of the
reserve adjustment:
F-35
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
As Adjusted
Historical June Pro Forma
30, 1997 June 30, 1997
------------------- -------------
Earnings before income taxes, minority
interest and extraordinary item $ 6,582 $ 7,565
Net earnings from continuing operations 4,118 4,350
Earning per common share 0.39 0.41
EBITDA 8,440 8,440
Adjusted EBITDA 7,498 7,498
Ratio of EBITDA to interest expense and
Distributions on Preferred Securities 2.62x
Ratio of Adjusted EBITDA to interest
expense and Distributions on
Preferred Securities 2.33x
Ratio of earnings to fixed charges 5.61x 2.34x
Stockholder's Equity $ 64,075 $ 63,368
Loss Ratio 80.1% 80.1%
Combined Ratio 100.7% 101.3%
The Company sold the Trust Preferred Securities (the "Preferred
Securities") on August 12, 1997 in an aggregate amount of $ 135,000,000. These
Preferred Securities were offered through a wholly-owned trust subsidiary of the
Company and are backed by Senior Subordinated Notes to the Trust from the
Company. These Preferred Securities were issued under Rule 144A of the SEC and
the Company will ultimately file a Form S-1 Registration Statement. The proceeds
of this offering were used to repurchase the remaining minority interest in
GGSH, repay the Term Debt and provide capital to the nonstandard automobile
insurers.
Assuming this offering took place at January 1, 1996 or at January 1,
1997, the pro forma effect of this offering on the Company's consolidated
statement of earnings is as follows:
December 31, June 30,
1996 1997
(unaudited) (unaudited)
Revenues $ 206,763 $ 71,533
Net earnings $ 9,751 $ 6,141
Net earnings per common share $ 1.29 $ 0.58
F-36
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
Notes to Consolidated Financial Statements
(dollars in thousands)
Effective January 1, 1997, the Company's nonstandard automobile
insurers entered into a quota share reinsurance treaty, for all new and renewal
policies written on or after the effective date, by placing 90% with Vesta Fire
Insurance Company and 10% with Granite Re. Also in 1997 the Company increased
its quota share reinsurance percentage to 40% from 15% on crop/hail business.
F-37
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of
Superior Insurance Company, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of
Superior Insurance Company, Inc. and Subsidiaries as of December 31, 1994 and
1995, and the related consolidated statements of earnings, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Superior Insurance Company, Inc. and Subsidiaries as of December 31, 1994 and
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company adopted Financial Accounting Standards Board Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities in 1993.
As discussed in Notes 1 and 6 to the consolidated financial statements,
the Company adopted Financial Accounting Standards Board Statement No. 109,
Accounting for Income Taxes, during the year ended December 31, 1993.
/s/ Coopers & Lybrand
Atlanta, Georgia
June 14, 1996
F-38
<PAGE>
<TABLE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
as of December 31, 1994 and 1995 and June 30, 1996
(dollars in thousands, except share data)
December 31, December 31, (unaudited)
1994 1995 June 30, 1996
--------------- --------------- ---------------
<CAPTION>
<S> <C> <C> <C>
ASSETS:
Investments:
Available for Sale:
Fixed Maturities, at market $ 93,860 $ 99,556 $ 102,777
Equity Securities, at market 7,140 8,070 13,987
Short-term investments, at amortized cost which
approximates market 5,538 8,462 3,739
Other investment, at cost 808 274 ---
Cash and cash equivalents 11 1,430 4,331
Receivables (net of allowance for doubtful account
of $310 and $500 at December
31, 1994 and 1995, respectively, and $500(unaudited)
in at June 30, 1996 31,425 30,209 32,894
Reinsurance recoverable on paid and unpaid losses, net 1,099 987 1,478
Accrued investment income 1,888 1,602 1,586
Deferred policy acquisition costs 9,004 7,574 8,038
Deferred income taxes 3,785 44 1,511
Property and equipment 357 697 657
Federal income taxes receivable 3,521 --- ---
Other assets 3,428 1,225 1,160
--------------- --------------- ---------------
Total Assets $ 161,864 $ 160,130 $ 172,158
=============== =============== ===============
LIABILITIES:
Losses and loss adjustment expenses $ 54,577 $ 47,112 $ 47,155
Unearned premiums 44,593 41,048 47,016
Draft payables 6,509 6,070 7,998
Federal income tax payable --- 177 1,284
Accrued expenses 4,307 4,107 4,088
--------------- --------------- ---------------
Total Liabilities 109,986 98,514 107,541
--------------- --------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock, $ 100 par value, 30,000 shares
authorized, issued and outstanding 3,000 3,000 3,000
Additional paid-in capital 37,025 37,025 37,025
Unrealized gain/(loss) on investments, net
of deferred tax benefit (expense)
of (412) in 1994 and 2,605 in 1995,
1,702 (unaudited) at June 30, 1996 (765) 4,838 1,808
Retained earnings 12,618 16,753 22,784
--------------- --------------- ---------------
Total Stockholders' Equity 51,878 61,616 64,617
--------------- --------------- ---------------
Total Liabilities and Stockholders' Equity $ 161,864 $ 160,130 $ 172,158
=============== =============== ===============
</TABLE>
F-39
<PAGE>
<TABLE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
for the Years Ended December 31, 1993, 1994 and 1995
and the Six Months ended June 30, 1995 and 1996
(dollars in thousands, except per share data)
Six Months Ended
Years Ended December 31, June 30,
--------------------------------------------- ----------------------------
<CAPTION>
(unaudited)
<S> <C> <C> <C> <C>
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
Gross premiums written $ 115,660 $ 112,906 $ 94,756 $ 42,915 $ 69,119
Less ceded premiums (366) (391) (686) (400) (412)
----- ----- ----- ----- -----
Net premiums written 115,294 112,515 94,070 42,515 69,707
Change in unearned premiums 2,842 322 3,544 7,538 (5,968)
----- --- ----- ----- -------
Net premiums earned 118,136 112,837 97,614 50,053 62,739
Net investment income 8,170 7,024 7,093 4,161 3,476
Other income 5,879 3,344 4,171 1,692 3,092
Net realized capital gain/(loss) 3,559 (200) 1,954 711 2,104
----- ----- ----- --- -----
Total Revenues 135,744 123,005 110,832 56,617 71,411
------- ------- ------- ------ ------
Expenses:
Losses and loss adjustment expenses 85,902 92,378 72,343 38,129 45,963
Policy acquisition and general and
administrative expenses 36,292 38,902 32,705 17,212 17,104
------ ------ ------ ------ ------
Total Expenses 122,194 131,280 105,048 55,341 63,067
------- ------- ------- ------ ------
Earnings (loss) before income taxes and
cumulative effect of change in accounting
principle 13,550 (8,275) 5,784 1,276 8,344
------ ------- ----- ----- -----
Income taxes:
Current income tax expense (benefit) 3,207 (2,770) 925 (539) 2,153
Deferred income tax expense (benefit) 774 (1,030) 724 700 160
--- ------- --- --- ---
Total Income Taxes 3,981 (3,800) 1,649 161 2,313
----- ------- ----- --- -----
Earnings (loss) before cumulative effect of
a change in accounting principle 9,569 (4,475) 4,135 1,115 6,031
Cumulative effect of a change in
accounting principle 1,389 --- --- --- ---
----- --- --- --- ---
Net Earnings (loss) $ 10,958 $ (4,475) $ 4,135 $ 1,115 $ 6,031
====== ======= ===== ===== =====
</TABLE>
F-40
<PAGE>
<TABLE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1993, 1994 and 1995
and the Six Months ended June 30, 1995 and 1996
(dollars in thousands)
Additional Unrealized Retained Total
Common Paid-In Gain (Loss) Earnings Stockholders'
Stock Capital Investments (Deficit) Equity
----- ------- ----------- --------- ------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $ 1,500 $ 37,025 $ 655 $ 29,635 $ 68,815
Change in unrealized (loss) gain on
investments, net of deferred taxes --- --- 3,983 --- 3,983
Cash dividends paid --- --- --- (10,000) (10,000)
Common stock dividends paid 1,500 --- --- (1,500) ---
Net Earnings --- --- --- 10,958 10,958
--- --- --- ------ ------
Balance at December 31, 1993 3,000 37,025 4,638 29,093 73,756
Change in unrealized (loss) gain on
investments, net of deferred taxes --- --- (5,403) --- (5,403)
Cash dividends paid --- --- --- (12,000) (12,000)
Net Loss --- --- --- (4,475) (4,475)
--- --- --- ------- -------
Balance at December 31, 1994 3,000 37,025 (765) 12,618 51,878
Change in unrealized gain on
investments, net of deferred taxes
(unaudited) --- --- 4,211 --- 4,211
Net Earnings (unaudited) --- --- --- 1,115 1,115
---------- -------- -------- ---------- --------
Balance at June 30, 1995
(unaudited) $ 3,000 $ 37,025 $ 3,446 $ 13,733 $ 57,204
===== ====== ===== ====== ======
Balance at December 31, 1994 $ 3,000 $ 37,025 $ (765) $ 12,618 $ 51,878
Change in unrealized loss on
investments, net of deferred taxes --- --- 5,603 --- 5,603
Net Earnings --- --- --- 4,135 4,135
--- --- --- ----- -----
Balance at December 31, 1995 3,000 37,025 4,838 16,753 61,616
Change in unrealized loss on
investments, net of deferred taxes
(unaudited) --- --- (3,030) --- (3,030)
Net Earnings (unaudited) --- --- --- 6,031 6,031
-------- ----------- -------- ------ ------
Balance at June 30, 1996
(unaudited) $ 3,000 $ 37,025 $ 1,808 $ 22,784 $ 64,617
===== ====== ===== ====== ======
</TABLE>
F-41
<PAGE>
<TABLE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1993,1994 and 1995
and the Six Months ended June 30, 1995 and 1996
(dollars in thousands)
Six Months Ended
Years Ended December 31, June 30,
------------------------------------------- --------------------------
(unaudited)
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net Earnings(loss) For The Period $ 10,958 $ (4,475) $ 4,135 $ 1,115 $ 6,031
Adjustments to reconcile net
earnings to net cash provided
from (used in) operations:
Net amortization on fixed maturities 909 499 205 108 124
Depreciation of property and equipment 128 185 214 81 97
Deferred income tax expense (benefit) (615) (1,030) 724 700 160
Net loss/(gain) on sale of fixed assets
and investments (3,546) 210 (1,940) (711) (2,104)
Net changes in operating assets
and liabilities:
Receivables (4,052) (1,303) 1,216 6,839 (2,685)
Reinsurance recoverable on unpaid losses (12) --- 49 4 ---
Accrued investment income 504 524 286 177 16
Federal income taxes receivable/(payable) (23) (4,075) 3,698 (558) 1,107
Deferred policy acquisition costs 248 (78) 1,430 1,684 (464)
Other assets 89 (2,382) 2,203 2,210 65
Losses and loss adjustment expenses (4,260) 985 (7,402) (4,966) 43
Unearned premiums (2,842) (322) (3,545) (7,538) 5,968
Drafts payables (2,091) (1,897) (439) (562) 1,928
Accrued expenses --- 4,307 (200) (835) (19)
--- ----- ----- ----- ----
Net cash provided from (used in) operations (4,605) (8,852) 634 (2,252) 10,627
------- ------- --- ------- ------
Cash Flow From (Used In) Investing Activities:
Net (purchases)/sales of short-term investments 5,322 1,845 (2,924) (2,242) 4,723
Proceeds from sales, calls and maturities of
fixed maturities 91,866 77,224 58,725 36,513 49,057
Purchases of fixed maturities (76,991) (64,678) (56,222) (32,461) (55,323)
Proceeds from sales of equity securities 91,397 136,121 87,319 43,210 80,205
Purchase of equity securities (92,605) (133,482) (86,663) (43,022) (86,233)
Proceeds from the sale of other investments --- --- 1,105 382 274
Proceeds from sales of property and equipment 30 33 --- --- ---
Purchases of property and equipment (388) (198) (555) (139) (69)
----- ----- ----- ----- ----
Net cash provided from (used in) investing
activities 18,631 16,865 785 2,241 (7,366)
------ ------ --- ----- -------
Cash flow used in financing activities:
Payment of dividends (10,000) (12,000) --- --- ---
-------- -------- --- --- ---
Net cash used in financing activities (10,000) (12,000) --- --- ---
-------- -------- --- --- ---
Increase (decrease) in cash and cash equivalents 4,026 (3,987) 1,419 (11) 2,901
Cash and cash equivalents, beginning of year (28) 3,998 11 11 1,430
---- ----- -- -- -----
Cash and cash equivalents, end of year $ 3,998 $ 11 $ 1,430 $ -- $ 4,331
===== == ===== == =====
Supplemental cash flow information:
Cash paid for income taxes, net of refunds $ 3,230 $ 1,305 $ (2,773) $ 19 $ 1,046
===== ===== ====== == =====
</TABLE>
F-42
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
1. Nature of Operations and Significant Accounting Policies
Superior Insurance Company, Inc. ("Superior" or the "Company") was a
wholly-owned subsidiary of Interfinancial Inc. (the "Parent"). Interfinancial
Inc. is a wholly-owned subsidiary of Fortis, Inc. Fortis, Inc. is equally owned
by Fortis AMEV, The Netherlands ("AMEV") and Fortis AG, Brussels, Belgium. As
further discussed in Note 14 the Company was sold by the Parent to GGS Holdings
on May 1, 1996.
The Company writes primarily private passenger automobile insurance
coverage. Approximately one-half of the Company's business is written in the
State of Florida. As such, a significant portion of agents' balances and
uncollected premiums is due from Florida policyholders.
The following is a description of the significant accounting policies
and practices employed:
Principles of Consolidation
The consolidated financial statements include the accounts, after
intercompany eliminations, of the Company and its wholly owned subsidiaries as
follows: Superior American Insurance Company ("Superior American") and Superior
Guaranty Insurance Company ("Superior Guaranty").
Basis of Presentation
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") which differ from
statutory accounting practices ("SAP") prescribed or permitted for insurance
companies by regulatory authorities in the following respects:
o Certain assets are included in the balance sheet that are
excluded as "Nonadmitted Assets" under statutory accounting.
o Costs incurred by the Company relating to the acquisition of
new business which are expensed for statutory purposes are
deferred and amortized on a straight-line basis over the term
of the related policies. Commissions allowed by reinsurers on
business ceded are deferred and amortized with policy
acquisition costs.
o The investment in wholly owned subsidiaries is consolidated
for GAAP rather than valued on the statutory equity method.
The net earnings or loss and changes in unassigned surplus of
the subsidiaries is reflected in net earnings for the period
rather than recorded directly to unassigned surplus.
o Investments in bonds are designated at purchase as held to
maturity, trading, or available for sale. Held-to-maturity
fixed maturity investments are reported at amortized cost, and
the remaining fixed maturity investments are reported at fair
value with unrealized holding gains and losses reported in
operations for those designated as trading and as a separate
component of stockholders' equity for those designated as
available for sale. All securities have been designated as
available for sale. For SAP, such fixed maturity investments
would be reported at amortized cost or market value based on
their NAIC rating.
F-43
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
o The liability for losses and loss adjustment expenses and
unearned premium reserves are recorded net of their reinsured
amounts for statutory accounting purposes.
o Deferred income taxes are not recognized on a statutory basis.
o Credits for reinsurance are recorded only to the extent
considered realizable. Under SAP, credit for reinsurance ceded
are allowed to the extent the reinsurers meet the statutory
requirements of the Insurance Department of the State of
Florida, principally statutory solvency.
A reconciliation of statutory net earnings and capital and surplus to
GAAP net earnings and stockholders' equity for Superior Insurance Company is as
follows:
<TABLE>
1993 1994 1995
---------------------------- ------------------------------ -----------------------------
Capital Net Capital Net Capital Net
and Earnings and Earnings and Earnings
Surplus Surplus Surplus
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Statutory Balance $ 56,656 $ 10,597 $ 43,577 $ 201 $ 49,277 $ 5,639
Non-admitted assets 130 --- 225 --- 472 ---
Investments market
value adjustment 5,571 --- (1,988) --- 5,279 ---
Deferred acquisition
costs 8,926 (248) 9,004 78 7,574 (1,430)
Losses and loss
adjustment expense 2,677 59 (1,600) (4,822) --- 600
Deferred income tax (154) 615 3,785 1,030 44 (724)
Rent rebate --- --- (333) (333) (277) 55
Pension and other
postretirement
benefits (50) 49 (548) (479) (667) (120)
Other --- (114) (244) (150) (86) 115
----- ----- ----- ----- ---- ---
GAAP Balance $ 73,756 $ 10,958 $ 51,878 $ (4,475) $ 61,616 $ 4,135
====== ====== ====== ======= ====== =====
</TABLE>
Premiums
Premiums are recognized as income ratably over the life of the related
policies and are stated net of ceded premiums. Unearned premiums are computed on
the semimonthly pro rata basis.
F-44
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Investments
During 1993, the Company adopted Financial Accounting Standards Board's
Statement No. 115, Accounting for Certain Investments in Debt and Equity
Securities. Accordingly, investments are presented on the following bases:
o Fixed maturities and equity securities -- at market value --
all such securities are classified as available for sale and
are carried at market value with the unrealized gain or loss
as a component of stockholders' equity.
o Short-term investments -- at amortized cost, which approxi-
mates market
o Other investment at cost
Realized gains and losses on sales of investments are recorded on the
trade date and are recognized in net earnings on the specific identification
basis. Other than temporary market value declines are recognized in the period
in which they are determined. Other changes in market values of debt and equity
securities are reflected as unrealized gain or loss directly in stockholders'
equity, net of deferred tax, and, accordingly, have no effect on net earnings.
Interest and dividend income are recognized as earned.
Cash And Cash Equivalents
For purposes of the statement of cash flows, the Company includes in
cash and cash equivalents all cash on hand and demand deposits with original
maturities of three months or less.
Deferred Policy Acquisition Costs
Deferred policy acquisition costs are comprised of agents' commissions,
premium taxes and certain other costs which are related directly to the
acquisition of new and renewal business, net of expense allowances received in
connection with reinsurance ceded, which have been accounted for as a reduction
of the related policy acquisition costs and are deferred and amortized
accordingly. These costs, to the extent that they are considered recoverable,
are deferred and amortized over the terms of the policies to which they relate.
Property And Equipment
Property and equipment are recorded at cost. All additions to property
and equipment made in 1995 are depreciated based on the straight-line method
over their estimated useful lives. Additions made prior to 1995 are depreciated
using the declining balance method over their estimated useful lives ranging
from five to seven years. Asset and accumulated depreciation accounts are
relieved for dispositions, with resulting gains or losses reflected in net
income.
F-45
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Losses And Loss Adjustment Expenses
The liability for losses and loss adjustment expenses includes
estimates for reported unpaid losses and loss adjustment expenses and for
estimated losses incurred, but not reported. This liability has not been
discounted. The Company's losses and loss adjustment expense liability includes
an aggregate stop-loss program. The Company retains an independent actuarial
firm to estimate the liability. The liability is established using individual
case-basis valuations and statistical analysis as claims are reported. Those
estimates are subject to the effects of trends in loss severity and frequency.
While management believes the liability is adequate, the provisions for losses
and loss adjustment expenses are necessarily based on estimates and are subject
to considerable variability. Changes in the estimated liability are charged or
credited to operations as additional information on the estimated amount of a
claim becomes known during the course of its settlement. The liability for
losses and loss adjustment expenses is reported net of the receivables for
salvage and subrogation of approximately $2,242 and $1,622 at December 31, 1994
and 1995, respectively.
Income Taxes
During January 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. The Company adopted SFAS No. 109 during the year ended December
31, 1993. The Statement adopts the liability method of accounting for deferred
income taxes. Under the liability method, companies establish a deferred tax
liability or asset for the future tax effects of temporary differences between
book and taxable income. Changes in future tax rates result in immediate
adjustments to deferred taxes. (See Note 6). Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Reinsurance
Reinsurance premiums, commissions, expense reimbursements, and reserves
related to reinsured business are accounted for on bases consistent with those
used in accounting for the original policies and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a reduction
of premium income.
Other Income
Other income consists of finance and service fees paid by policyholders
in relation to installment billings.
Recently Issued Accounting Pronouncements
In March 1995, SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, was issued. SFAS
No. 121 requires that long-lived assets to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. This Statement is
effective for financial statements for fiscal years beginning after December 31,
1995. The Company intends to adopt SFAS No. 121 in 1996. Based upon management's
review and analysis, adoption of SFAS No. 121 is not expected to have a material
impact on the Company's results of operations in 1996.
F-46
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Vulnerability From Concentration
At December 31, 1995, the Company did not have a material concentration
of financial instruments in a single investee, industry or geographic location.
Also at December 31, 1995, the Company did not have a concentration of (1)
business transactions with a particular customer, lender or distributor, (2)
revenues from a particular product or service, (3) sources of supply of labor or
services used in the business, or (4) a market or geographic area in which
business is conducted that makes it vulnerable to an event that is at least
reasonably possible to occur in the near term and which could cause a serious
impact to the Company's financial condition, except for the market and
geographic concentration described in the following paragraph.
The Company writes nonstandard automobile insurance primarily in
California and Florida. As a result, the Company is always at risk that there
could be significant losses arising in certain geographic areas. The Company
protects itself from such events by purchasing catastrophe insurance.
Use of Estimates
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known which could impact
the amounts reported and disclosed herein.
Unaudited Interim Financial Statements
The consolidated financial statements for the six months ended June 30,
1995 and 1996 have been prepared using the applicable accounting principles used
in the audited financial statements. These statements are unaudited but, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments and accruals) necessary for a fair presentation of the
financial information set forth herein.
F-47
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
2. Investments
Investments are summarized as follows:
<TABLE>
Unrealized
------------------------------
Amortized Estimated
Cost Gain Loss Market Value
---- ---- ---- ------------
<CAPTION>
<S> <C> <C> <C> <C>
December 31, 1995 Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 28,612 $ 1,057 $ --- $ 29,669
Obligations of states and political
subdivisions 24,595 1,251 (15) 25,831
Corporate securities 41,070 2,988 (2) 44,056
------ ----- --- ------
Total Fixed Maturities 94,277 5,296 (17) 99,556
------ ----- ---- ------
Equity Securities:
Preferred stocks 713 25 --- 738
Common stocks 5,193 2,370 (231) 7,332
----- ----- ----- -----
5,906 2,395 (231) 8,070
----- ----- ----- ------
Short-term investments (1) 8,462 --- --- 8,462
Other investments 274 --- --- 274
--- --- --- ---
Total Investments $ 108,919 $ 7,691 $ (248) $ 116,362
======= ===== ===== =======
December 31, 1994 Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and agencies $ 25,312 $ 31 $ (767) $ 24,576
Obligations of states and political
subdivisions 30,567 380 (680) 30,267
Corporate securities 39,969 292 (1,244) 39,017
------ --- ------ ------
Total Fixed Maturities 95,848 703 (2,691) 93,860
------ --- ------- -------
Equity Securities:
Preferred stocks 713 32 --- 745
Common stocks 5,616 1,201 (422) 6,395
----- ----- ----- -----
6,329 1,233 (422) 7,140
----- ----- ----- -----
Short-term investments 5,538 --- --- 5,538
Other investments 808 --- --- 808
--- --- --- ---
Total Investments $ 108,523 $ 1,936 $ (3,113) $ 107,346
======= ===== ======= =======
</TABLE>
F-48
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
The amortized cost and estimated market value of fixed maturities at
December 31, 1995 and 1994, by contractual maturity, are shown in the table
which follows. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without penalty:
<TABLE>
1995 1994
----------------------------------- ----------------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
<CAPTION>
<S> <C> <C> <C> <C>
Maturity:
Due in 1 year or less $ 2,508 $ 2,510 $ 5,514 $ 5,521
Due after 1 year through 5 years 31,166 32,164 20,403 20,086
Due after 5 years through 10 years 33,012 35,338 33,522 32,550
Due after 10 years 27,591 29,544 36,409 35,703
------ ------ ------ ------
Total $ 94,277 $ 99,556 $ 95,848 $ 93,860
====== ====== ====== ======
</TABLE>
Gains and losses realized on sales of investments in fixed maturities
are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------------- -------------- --------------
<S> <C> <C> <C>
Gross gains realized on fixed maturities $ 3,040 $ 779 $ 1,442
Gross losses realized on fixed maturities 95 1,270 322
Gross gains realized on equity securities 637 694 507
Gross losses realized on equity securities 28 457 256
</TABLE>
An analysis of net investment income for the years ended December 31,
1993, 1994, and 1995 follows:
1993 1994 1995
-------------- -------------- --------------
Fixed maturities $ 7,939 $ 6,691 $ 6,630
Equity securities 461 538 603
Short-term investments 141 106 68
-------------- -------------- --------------
Total Investment Income 8,541 7,335 7,301
Investment Expenses 371 311 208
-------------- -------------- --------------
Net Investment Income $ 8,170 $ 7,024 $ 7,093
-------------- -------------- --------------
F-49
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Investments with an approximate market value of $17,384 and $2,366
(approximate amortized cost of $16,907 and $2,362) as of December 31, 1995 and
1994, respectively, were on deposit in the United States and Canada. The
deposits are required by law to support certain reinsurance contracts,
performance bonds and outstanding loss liabilities on assumed business.
In May 1990, Superior entered into a limited partnership agreement with
AMEV Venture Management ("AVM"), an AMEV affiliate. The Limited Partnership,
AMEV Venture III, is an investment pool which is managed by AVM as a general
partner. The purpose of the pool is to make speculative investments in small
business, with the partners sharing in the profits/losses resulting from the
pool. Superior committed to an investment of $2,000 which is approximately 8% of
the total pool. This investment is carried at cost and included in, "other
investment". As of May, 1996, the Company had disposed of its remaining interest
in this investment.
24. Deferred Policy Acquisition Costs
Policy acquisition costs are capitalized and amortized over the life of
the policies. Policy acquisition costs are those costs directly related to the
issuance of insurance policies including commissions and underwriting expenses
net of reinsurance commission income on such policies. Policy acquisition costs
deferred and the related amortization charged to earnings were as follows:
1993 1994 1995
--------------- --------------- --------------
Balance, beginning of year $ 9,174 $ 8,926 $ 9,004
Costs deferred during year 23,561 23,029 17,606
Amortization during year (23,809) (22,951) (19,036)
--------------- --------------- --------------
Balance, end of year $ 8,926 $ 9,004 $ 7,574
--------------- --------------- --------------
25. Property and Equipment
Property and equipment at December 31 are summarized as follows:
1995
Accumulated
1994 Net 1995 Cost Depreciation 1995 Net
--------- -------- ----------- ---------
Office furniture and equipment $ 62 $ 1,099 $ 723 $ 376
Automobiles --- 20 20 ---
Computer equipment 295 1,086 765 321
Leasehold improvements --- 6 6 ---
--------- -------- ----------- ---------
$ 357 $ 2,211 $ 1,514 $ 697
--------- -------- ----------- ---------
F-50
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Accumulated depreciation at December 31, 1994 was approximately $1,370.
Depreciation expense related to property and equipment for the years ended
December 31, 1995, 1994 and 1993 was approximately $214, $185 and $128,
respectively.
5. Unpaid Losses and Loss Adjustment Expenses
Activity in the liability for unpaid losses and loss adjustment expenses is
summarized as follows:
1993 1994 1995
Balance at January 1 $ 57,164 $ 52,610 $ 54,577
Less reinsurance recoverables 361 68 1,099
----------- ---------- ----------
Net balance at January 1 56,803 52,542 53,478
----------- ---------- ----------
Incurred related to:
Current year 92,619 91,064 77,266
Prior years (6,717) 1,314 (4,923)
----------- ---------- ----------
Total incurred 85,902 92,378 72,343
----------- ---------- ----------
Paid related to:
Current year 57,929 56,505 48,272
Prior years 32,234 34,937 31,424
----------- ---------- ----------
Total paid 90,163 91,442 79,696
----------- ---------- ----------
Net balance at December 31 52,542 53,478 46,125
Plus reinsurance recoverables
on unpaid losses 68 1,099 987
----------- ---------- ----------
Balance at December 31 $ 52,610 $ 54,577 $ 47,112
----------- ---------- ----------
The foregoing reconciliation shows that redundancies of approximately
$4,923 and $6,717 in the liabilities at January 1, 1995 and at January 1, 1993,
respectively, emerged during 1995 and 1993. These redundancies resulted from
lower than anticipated losses resulting from a change in settlement costs
relating to those estimates. The reconciliation shows that a deficiency of
approximately $1,314 in the liabilities at January 1, 1994 emerged during 1994.
This deficiency resulted from higher than anticipated losses resulting primarily
from a change in the settlement cost of loss reported in 1990.
The anticipated effect of inflation is implicitly considered when
estimating liabilities for losses and loss adjustment expenses. While
anticipated price increases due to inflation are considered in estimating the
ultimate claim costs, the increase in average severities of claims is caused by
a number of factors that vary with the individual type of policy written. Future
average severities are projected based on historical trends adjusted for
implemented changes
F-51
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
in underwriting standards, policy provisions, and general economic trends. Those
anticipated trends are monitored based on actual development and are modified if
necessary.
Case liabilities (and costs of related litigation) have been
established when sufficient information has been developed to indicate the
involvement of a specific insurance policy. In addition, incurred but not
reported liabilities have been established to cover additional exposure on both
known and unasserted claims. Those liabilities are reviewed and updated
continually.
6. Income Taxes
For the year ended December 31, 1995, the Company will file a
consolidated federal income tax return with its former subsidiaries owned by
Fortis, Inc. An intercompany tax sharing agreement between the Company and its
subsidiaries provided that income taxes will be allocated based upon the
percentage that each subsidiary's separate return tax liability bears to the
total amount of tax liability calculated for all members of the group in
accordance with the Internal Revenue Code of 1986, as amended. Intercompany tax
payments are remitted at such times as estimated taxes would be required to be
made to the Internal Revenue Service. A reconciliation of the differences
between federal tax computed by applying the federal statutory rate of 35% to
earnings before income taxes and the income tax provision is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------------- -------------- --------------
<S> <C> <C> <C>
Computed income taxes at statutory rate $ 4,743 $ (2,896) $ 2,024
Dividends received deduction (118) (69) (53)
Tax-exempt interest (1,136) (866) (538)
Proration 188 140 89
Other 304 (109) 127
--------------- -------------- --------------
Income tax expense (benefit) $ 3,981 $ (3,800) $ 1,649
=============== ============ ==============
</TABLE>
As described in Note 1, the Company adopted SFAS No. 109 effective in
1993. The effect on years prior to 1993 of changing to this method was a benefit
of approximately $1,389 and is reflected in the consolidated statement of
earnings as the cumulative effect of a change in accounting principle. The
current or deferred tax consequences of a transaction are measured by applying
the provisions of enacted tax laws to determine the amount of taxes payable
currently or in future years. The method of accounting for income taxes prior to
SFAS No. 109 provided that deferred taxes, once recorded, were not adjusted for
changes in tax rates.
F-52
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
The net deferred tax asset at December 31, 1994 and 1995 is comprised of the
following:
1994 1995
---------------- ---------------
Deferred tax assets:
Unpaid losses and loss adjustment expenses $ 1,848 $ 1,454
Unearned premiums 3,122 2,873
Allowance for doubtful accounts 109 175
Unrealized losses on investments 412 ---
Salvage and subrogation 694 541
Other 751 257
---------------- ---------------
6,936 5,300
---------------- ---------------
Deferred tax liabilities:
Deferred policy acquisitions costs 3,151 2,651
Unrealized gain on investments --- 2,605
---------------- ---------------
3,151 5,256
---------------- ---------------
Net deferred tax asset $ 3,785 $ 44
---------------- ---------------
The Company is required to establish a "valuation allowance" for any
portion of its deferred tax assets which is unlikely to be realized. No
valuation allowance was established as of December 31, 1995 or 1994 on the
deferred tax assets, since management believes it is more likely than not that
the Company will realize the benefit of its deferred tax assets.
Federal income tax attributed to the Company has been examined through
1993. In the opinion of management, the Company has adequately provided for the
possible effects of future assessments related to prior years.
7. Retirement and Other Employee Benefits
As part of the sale of the Company, as described in Note 14, the
Company withdrew from all of the plans mentioned below and paid Fortis
approximately $557 to assume the related liabilities.
Superior participated in a non-contributory defined benefit pension
plan ("the Pension Plan") administered by Fortis, Inc., covering substantially
all employees who were at least 21 years of age and who had one year of service
with Superior. The Pension Plan provided benefits payable to participants on
retirement or disability and to beneficiaries of participants in the event of
death. The benefits were based on years of service and the employee's
compensation during such years of service. The Company's funding policy was to
contribute annually at least the amount required to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974.
F-53
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Contributions were intended to provide not only for benefits attributed
to service to date, but also for those expected to be earned in the future. The
net periodic pension cost allocated to Superior under the Pension Plan for 1993,
1994 and 1995 was approximately $206, $186 and $119, respectively. In 1993,
pension expense includes a one-time accrual for implementation of SFAS 106 of
approximately $81.
Superior also participated in a contributory profit sharing plan ("the
Profit Sharing Plan") sponsored by Fortis, Inc. This Profit Sharing Plan covered
all employees with one year of service to the Company and provided benefits
payable to participants on retirement or disability and to beneficiaries of
participants in the event of death. The amount expensed for the Profit Sharing
Plan for 1993, 1994 and 1995 was approximately $252, $381 and $146,
respectively.
In addition to retirement benefits, the Company participated in other
health care and life insurance benefit plans ("postretirement benefits") for
retired employees, sponsored by Fortis, Inc. Health care benefits, either
through a Fortis-sponsored retiree plan for retirees under age 65 or through a
cost offset for individually purchased Medigap policies for retirees over age
65, were available to employees who retired on or after January 1, 1993, at age
55 or older, with 15 or more years of service. Life insurance, on a retiree pay
all basis, was available to those who retired on or after January 1, 1993. Both
the retiree medical and retiree life programs were implemented in 1993. The
Company made contributions to these plans as claims were incurred; no claims
were incurred during 1993, 1994 or 1995. In 1993, the NAIC issued new rules that
required the projected future cost of providing postretirement benefits, such as
health care and life insurance, be recognized as an expense as employees render
service instead of when the benefits are paid.
As required, Superior complied with the new rules beginning in 1995 and
elected to record these costs on a prospective basis. The effect of this
accounting change on the financial statements of the Company was not material.
8. Reinsurance
The Company limits the maximum net loss that can arise from a large
risk, or risks in concentrated areas of exposure, by reinsuring (ceding) certain
levels of risks with other insurers or reinsurers. Superior has a casualty
excess of loss treaty which covers losses in excess of $100 up to a maximum of
$2,000. Superior maintains both auto and property catastrophe excess
reinsurance. Superior's first automobile casualty excess contains limits of $200
excess of $100, its second casualty excess contains limits of $700 excess of
$300 and its third casualty excess has a limit of $1,000 excess of $1,000.
Further, Superior's first layer of property catastrophe excess reinsurance
covers 95% of $500 excess of $500 with an annual limit of $1,000 and its second
layer or property catastrophe excess reinsurance covers 95% of $2,000 excess of
$1,000 with an annual limit of $4,000.
The Company remains contingently liable with respect to reinsurance,
which would become an ultimate liability of the Company in the event that such
reinsuring companies might be unable, at some later date, to meet their
obligations under the reinsurance agreements.
In 1993, 1994 and 1995, 100% of amounts recoverable from reinsurers are
with Prudential Re, which maintains an A.M. Best rating of A. Company management
believes amounts recoverable from reinsurers are collectible.
Amounts recoverable from reinsurers relating to unpaid losses and loss
adjustment expenses were approximately $1,099 and $987 as of December 31, 1994
and 1995, respectively.
F-54
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Reinsurance activity for 1993, 1994 and 1995, which includes
reinsurance with related parties, is summarized as follows:
<TABLE>
<CAPTION>
Direct Assumed Ceded Net
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
1993
Premiums written $ 88,877 $ 26,783 $ 366 $ 115,294
Premiums earned 87,618 31,183 665 118,136
Incurred losses and loss adjustment expenses 64,228 21,896 222 85,902
Commission expenses (income) 13,700 4,570 --- 18,270
1994
Premiums written $ 92,540 $ 20,366 $ 391 $ 112,515
Premiums earned 89,755 23,437 355 112,837
Incurred losses and loss adjustment expenses 73,181 20,244 1,047 92,378
Commission expenses (income) 14,165 3,192 --- 17,357
1995
Premiums written $ 84,840 $ 9,916 $ 686 $ 94,070
Premiums earned 84,641 13,592 619 97,614
Incurred losses and loss adjustment expenses 63,462 8,777 (104) 72,343
Commission expenses (income) 12,314 1,324 --- 13,638
</TABLE>
9. Related-party Transactions
The Company and its subsidiaries have entered into transactions with
various related parties including transactions with its affiliated companies and
Fortis, Inc. The following transactions occurred with related parties in the
years ended December 31, 1993, 1994, and 1995:
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Management fees charged by Fortis $ 832 $ 842 $ 729
Reinsurance with affiliated companies, net:
Assumed premiums earned 8,321 9,092 7,786
Assumed losses and loss adjustment expenses incurred 8,480 6,266 5,847
Assumed commissions 1,337 1,755 1,112
</TABLE>
F-55
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
10. Effects of Statutory Accounting Practices and Dividend Restrictions
Under state of Florida insurance regulations, the maximum amount of
dividends Superior, Superior American and Superior Guaranty can pay to their
stockholders without prior approval of the Insurance Commissioner of the State
of Florida is limited. The maximum amount of dividends which Superior can pay to
its stockholders during 1996 is approximately $4,900. The maximum amount of
dividends which Superior American can pay to its stockholder during 1996 is
approximately $320.
11. Regulatory Matters
Superior, Superior American and Superior Guaranty, domiciled in
Florida, prepare their statutory financial statements in accordance with
accounting practices prescribed or permitted by the Florida Department of
Insurance ("FDOI"). Prescribed statutory accounting practices include a variety
of publications of the National Association of Insurance Commissioners ("NAIC"),
as well as state laws, regulations, and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. Superior, Superior American and Superior Guaranty utilize no
significant permitted practices.
The NAIC has promulgated risk-based capital ("RBC") requirements for
property/casualty insurance companies to evaluate the adequacy of statutory
capital and surplus in relation to investment and insurance risks, such as asset
quality, asset and liability matching, loss reserve adequacy and other business
factors. The RBC information is used by state insurance regulators as an early
warning tool to identify, for the purpose of initiating regulatory action,
insurance companies that potentially are inadequately capitalized. In addition,
the formula defines new minimum capital standards that will supplement the
current system of fixed minimum capital and surplus requirements on a
state-by-state basis. Regulatory compliance is determined by a ratio (the
"Ratio") of the enterprise's regulatory total adjusted capital, as defined by
the NAIC, to its authorized control level RBC, as defined by the NAIC.
Generally, a Ratio in excess of 200% of authorized control level RBC (the
"company action level") requires no corrective actions by Superior, Superior
American, Superior Guaranty, or regulators. As of December 31, 1995, all six
company's RBC level were in excess of the company action level.
12. Leases
The Company has certain commitments under long-term operating leases
for its home and sales offices. Rental expense under these commitments was $800,
$483 and $1,012 for 1993, 1994 and 1995, respectively. Future minimum lease
payments required under these noncancelable operating leases are as follows:
1996 $ 948
1997 921
1998 440
1999 350
2000 and thereafter 58
-------------
Total $ 2,717
=============
F-57
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
13. Contingencies
The Company, and its subsidiaries, are named as defendants in various
lawsuits relating to their business. Legal actions arise from claims made under
insurance policies issued by the Company and its subsidiaries. These actions
were considered by the Company in establishing its loss liabilities. The Company
believes that the ultimate disposition of these lawsuits will not materially
affect the Company's operations or financial position.
The increase in number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. The Company recognizes its obligations for guaranty fund assessments
when it receives notice that an amount is payable to a guaranty fund. The
ultimate amount of these assessments may differ from that which has already been
assessed.
14. Subsequent Event (Unaudited)
On January 31, 1996, the Symons International Group, Inc. ("Symons")
entered into an agreement ("Agreement") with GS Capital Partners II, L.P. to
create a company, GGS Management Holdings, Inc. ("GGS Holdings") to be owned 52%
by Symons and 48% by investment funds associated with Goldman, Sachs & Co.
In connection with the above transaction, on April 30, 1996, GGS
Holdings acquired all of the outstanding shares of common stock of the Company
and its wholly owned subsidiaries, Superior American and Superior Guaranty, for
cash of approximately $66,389.
Subsequent to its acquisition on April 30, 1996, the Company has
entered into a quota share reinsurance arrangement with Pafco General Insurance
Company ("Pafco"), a wholly owned subsidiary of the Company's ultimate parent,
Symons International Group, Inc. ("Registrant"), whereby Pafco shall cede 100%
of its gross premiums written on or after May 1, 1996 that are in excess of six
times outstanding capital and surplus.
When the FDOI approved the acquisition of Superior by GGS Holdings, it
prohibited Superior from paying any dividends (whether extraordinary or not) for
four years from the date of acquisition without the prior written approval of
the FDOI.
F-57
<PAGE>
SUPERIOR INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
The acquisition of the Company was accounted for under the purchase
method of accounting and was recorded as follows:
Assets Acquired:
Invested assets $ 118,665
Receivables 34,933
Deferred acquisition costs 7,925
Other assets 2,082
------------------
Total 163,605
------------------
Liabilities Assumed:
Unpaid losses and loss adjustment expenses 44,423
Unearned premiums 45,280
Other liabilities 10,863
------------------
Total 100,566
------------------
Net Assets Acquired 63,039
Purchase Price 66,590
Excess Purchase Price 3,551
Less amounts allocated to deferred income
taxes on unrealized gains on investments 1,334
------------------
Goodwill $ 2,217
==================
Goodwill is amortized over a 25 year period on a straight line basis
based upon management's estimate of the expected benefit period.
F-58
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 37 of the Indiana Business Corporation Law, as amended (the
"ICBL"), grants to each corporation broad powers to indemnify directors,
officers, employees or agents against liabilities and expenses incurred in
certain proceedings if the conduct in question as found to be in good faith and
was reasonably believed to be in the corporation's best interests. The
indemnification rights provided by the Registrant's articles of incorporation
and by-laws generally provide the maximum indemnification protection available
under law to the directors and officers of the Registrant, subject to certain
restrictions on such indemnification in the event of the occurrence of certain
changes of control and subject to restrictions on indemnification for
liabilities incurred by directors and officers who unsuccessfully defend actions
brought against them by or in right of the corporation. Directors, officers,
employees or agents of the Registrant who also are directors, officers,
employees or agents of Goran receive similar indemnification protection under
Goran's by-laws. In addition, Goran carries directors and officers insurance
policies.
The above discussion of the Company's By-laws and the IBCL is not
intended to be exhaustive and is qualified in its entirety by such By-laws and
the IBCL.
The Declaration provides that:
(a) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) each Trustee, (ii) any Affiliate of
any Trustee, (iii) any officer, director, shareholder, employee,
representative or agent of any Trustee and (iv) any employee or agent
of the Trust or its Affiliates (referred to herein as an "Indemnified
Person") from and against any loss, damage, liability, tax, penalty,
expense or claim of any kind or nature whatsoever incurred by such
Indemnified Person by reason of the creation, operation, dissolution,
winding-up or termination of the Trust or any act or omission
performed or omitted by such Indemnified Person in good faith on
behalf on behalf of the Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on
such Indemnified Person by this Declaration, except that no
Indemnified Person shall be entitled to be indemnified in respect of
any loss, damage or claim incurred by such Indemnified Person by
reason of its negligence (or, in the case of the Delaware Trustee and
its related Indemnified Persons, gross negligence) or willful
misconduct with respect to such acts or omission; and
(b) to the fullest extent permitted by applicable law, to advance
expenses (including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding prior to the
final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Company of (i) a written affirmation by or on
behalf of the Indemnified Person of its or his good faith belief that
it or he has met the standard of conduct set forth herein and (ii) an
undertaking by or on behalf of the Indemnified Person to repay such
amount if it shall be determined that the Indemnified Person is not
entitled to be indemnified as authorized in the preceding subsection.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits furnished with this Registration Statement are listed
beginning on Page E-1.
(b) The following financial statement schedules of the Registrant
are included in the Registration Statement beginning on Page
II-6.
Report of Independent Accountants
Schedule II Condensed Financial Information of
Registrant
Schedule IV Reinsurance
Schedule V Valuation and Qualifying Accounts
Schedule VI Supplemental Information Concerning Property
-Casualty Insurance Operations
ITEM 22. UNDERTAKINGS
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
to include any facts or events arising after the effective date of the
Registration Statement which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement and to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in
the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each undersigned Registrant pursuant to the foregoing provisions, or otherwise,
each Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by each
undersigned Registrant of expenses incurred or paid by a director, officer of
controlling person of each Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, each Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Symons
International Group, Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Indianapolis, and State of Indiana, on
the _16th__ day of September, 1997.
SYMONS INTERNATIONAL GROUP, INC.
By__/s/ Alan G. Symons__________________________
Alan G. Symons
Chief Executive Officer
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman of the Board of September 16, 1997
G. Gordon Symons Directors
* Chief Executive Officer and September 16, 1997
Alan G. Symons Director (Principal
Executive Officer)
* President and Chief
Douglas H. Symons Operating Officer and September 16, 1997
Director
Vice President, Chief
* Financial Officer and September 16, 1997
Gary P. Hutchcraft Treasurer (Principal
Financial and Accounting
Officer)
* Vice President, General
David L. Bates Counsel and Secretary September 16, 1997
*
John J. McKeating Director September 16, 1997
*
Robert C. Whiting Director September 16, 1997
James G. Torrance, Q.C. Director September __, 1997
*
David R. Doyle Director September 16, 1997
*
Jerome B. Gordon Director September 16, 1997
*By:__/s/ Alan G. Symons_____________
Alan G. Symons
Attorney-in-Fact
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, SIG Capital
Trust I certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indianapolis, and State of Indiana, on the _16th_
day of September, 1997.
SIG CAPITAL TRUST I
By__/s/ Alan G. Symons___________________________
Alan G. Symons
Company Trustee
By__/s/ Douglas H. Symons________________________
Douglas H. Symons
Company Trustee
By__/s/ Gary P. Hutchcraft_______________________
Gary P. Hutchcraft
Company Trustee
II-5
<PAGE>
Report of Independent Accountants
Board of Directors and Stockholder of
Symons International Group, Inc. and Subsidiaries
In connection with our audits of the consolidated balance sheets of Symons
International Group, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the related consolidated statements of operations, changes in stockholder's
equity and cash flows for the three years in the period ended December 31, 1996,
which financial statements are included in the registration statement, we have
also audited the financial statement schedules listed in Item 21 herein.
In our opinion, these financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included herein.
/s/ COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
March 21, 1997
II-6
<PAGE>
SYMONS INTERNATIONAL GROUP, INC. - CONSOLIDATED
SCHEDULE II - CONDENSED FINANCIAL
INFORMATION OF REGISTRANT
As Of December 31,
(In Thousands)
1995 1996
ASSETS
Assets:
Investments In And Advances To Related Parties $18,589 $77,514
Cash and Cash Equivalents 0 6,160
Deferred Income Taxes 52 0
Property and Equipment 337 8
Other 57 168
Intangible Assets 0 83
Total Assets $19,035 $83,933
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payables to Affiliates $8,671 $350
Federal Income Tax Payable 0 81
Line of Credit and Notes Payable 0 0
Other 829 992
Total Liabilities $9,500 $1,423
Minority Interest 0 21,160
Stockholders' Equity:
Common Stock, No Par, 1,000,000
Shares Authorized, 10,450,000 $1,000 $38,969
Issued and Outstanding
Additional Paid-In Capital 3,130 5,905
Unrealized Loss On Investments
(Net of Deferred Taxes of ($23,000) (45) 820
in 1995 and $1,225,000 in 1996)
Retained Earnings 5,450 15,206
Total Stockholders' Equity $9,535 $60,900
Total Liabilities and Stockholders' Equity $19,035 $83,933
II-7
<PAGE>
SYMONS INTERNATIONAL GROUP, INC. - CONSOLIDATED
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
For The Years Ended December 31,
(In Thousands)
1994 1995 1996
Net Investment Income $37 $1,522 $98
Net Realized Investment Losses (8) (52) 0
Other Income 8,533 7,626 5,353
Total Revenue 8,562 9,096 5,451
Expenses:
Policy Acquisition and General and 7,528 7,891 4,269
Administrative Expenses
Interest Expense 874 621 613
Total Expenses 8,402 8,512 4,882
Income Before Taxes and Minority
Interest 160 584 569
Provision for Income Taxes:
Current Year 176 293 228
Prior Year (70) 0 0
Provision for Income Taxes 106 293 228
Net Income Before Equity in Net
Income of Subsidiaries 54 291 341
Equity in Net Income of Subsidiaries 2,063 4,530 12,915
Net Income for the Period $2,117 $4,821 $13,256
II-7
<PAGE>
SYMONS INTERNATIONAL GROUP, INC. - CONSOLIDATED
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
For The Years Ended December 31,
(In Thousands)
1994 1995 1996
Net Income $2,117 $4,821 $13,256
Cash Flows From Operating Activities:
Adjustments to Reconcile Net Cash
Provided by (Used In)
Operations:
Equity In Net Income of Subsidiaries (2,063) (4,530) (12,915)
Depreciation of Property and Equity 91 37 52
Net Realized Capital Loss 8 (52) 0
Amortization of Intangible Assets 169 88 3
Net Changes in Operating Assets
and Liabilities:
Federal Income Taxes
Recoverable (Payable) 206 (176) 81
Other Assets (70) 216 (145)
Other Liabilities (1,060) 518 163
Net Cash Provided From (Used In)
Operations (602) 922 495
Cash Flow Used In Investing Activities:
Purchase of Property and Equipment (58) (179) 0
Net Cash Used in Investing Activities: (58) (179) 0
Cash Flows Provided by (Used In)
Financing Activities:
Proceeds From Common Stock Offering 0 0 37,969
Repayment of Loans (1,750) (1,250) 0
Contributed Capital 0 0 (20,475)
Loans From Related Parties 2,410 507 (8,329)
Payment of Dividend to Parent 0 0 (3,500)
Net Cash Provided By (Used In)
Financing Activities 660 (743) 5,665
Increase (Decrease) in Cash and
Cash Equivalents 0 0 6,160
Cash and Cash Equivalents -
Beginning of Year 0 0 0
Cash and Cash Equivalents -
End of Year 0 0 6,160
II-8
<PAGE>
SYMONS INTERNATIONAL GROUP, INC. - CONSOLIDATED
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
For The Years Ended December 31, 1994, 1995 and 1996
Basis of Presentation
The condensed financial information should be read in conjunction with the
consolidated financial statements of Symons International Group, Inc. The
condensed financial information includes the accounts and activities of the
Parent Company which acts as the holding company for the insurance subsidiaries.
SYMONS INTERNATIONAL GROUP, INC. - CONSOLIDATED
SCHEDULE IV - REINSURANCE
For The Years Ended December 31,
(In Thousands)
1994 1995 1996
Direct Amount $102,178 $123,381 $298,596
Assumed From Other Companies $956 $1,253 $6,903
Ceded to Other Companies $67,995 $71,187 ($95,907)
Net Amount $35,139 $53,447 $209,592
Percentage of Amount Assumed to Net 2.7% 2.3% 3.3%
II-9
<PAGE>
<TABLE>
SYMONS INTERNATIONAL GROUP, INC. - CONSOLIDATED
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended December 31,
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
1994 -Allowance for 1995-Allowance for 1996-Allowance for
Doubtful Accounts Doubtful Accounts Doubtful Accounts
Additions:
Balance at Beginning of $1,179 $1,209 $927
Period
Reserves Acquired in the 0 0 500
Superior Acquisition
Charged to Costs and (86) 2,523 5,034
Expenses (1)
Charged to Other 0 0 0
Accounts
Deductions from (116) (2) 2,805 (2) 4,981
Reserves
Balance at End of Period $1,209 $927 $1,480
</TABLE>
(1) In 1993, the Company began to direct bill policyholders rather than agents
for premiums. During late 1994 and into 1995, the Company experienced an
increase in premiums written. During 1995, the Company further evaluated the
collectibility of this business and incurred a bad debt expense of approximately
$2.5 million. The Company continually monitors the adequacy of its allowance for
doubtful accounts and believes the balance of such allowance at December 31,
1994, 1995 and 1996 was adequate.
(2) Uncollectible accounts written off, net of recoveries.
II-10
<PAGE>
<TABLE>
SYMONS INTERNATIONAL GROUP, INC. - CONSOLIDATED
SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY - CASUALTY INSURANCE OPERATIONS
For The Years Ended December 31,
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deferred Reserves Discount, Unearned Earned Net Claims and Amorti- Paid Premiums
Policy for if any, Premiums Premiums Invest- Adjustment zation of claims Written
Acqui- Unpaid deducted ment Expenses Deferred and Claim
sition Claims in Income Incurred Related Policy Adjust-
Costs and Column to: Acqui- ment
Claim C sition Expenses
Adjust- Costs
ment
Expense
Current Prior
Years Years
1994 1,479 29,269 0 14,416 32,126 1,241 26,268 202 4,852 26,995 103,135
1995 2,379 59,421 0 17,497 49,641 1,173 35,184 787 7,150 31,075 124,634
1996 12,800 101,719 0 87,285 191,759 6,733 137,679 (570) 27,657 130,895 305,499
</TABLE>
Note: All amounts in the above table are net of the effects of reinsurance and
related commission income, except for net investment income regarding which
reinsurance is not applicable, premiums written liabilities for losses and loss
adjustment expenses, and unearned premiums which are stated on a gross basis.
II-11
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Registrant's Restated Articles of Incorporation*
3.2 Bylaws of Symons International Group, Inc, as restated July
29, 1996*
4.1 Indenture between Symons International Group, Inc. and
Wilmington Trust Company dated as of August 15, 1997,
relating to the Senior Subordinated Notes
4.2 Form of Certificate of Exchange Notes (in substantially the
form of Section 2.2 to Exhibit 4.1)
4.3 Certificate of Trust of SIG Capital Trust I, dated August 4,
1997
4.4 Amended and Restated Declaration of Trust for SIG Capital
Trust I, dated August 15, 1997
4.5 Form of Exchange Preferred Security Certificate for SIG
Capital Trust I (included as Exhibit D to Exhibit 4.4)
4.6 Form of Exchange Guarantee of Symons International Group,
Inc. relating to the Exchange Preferred Securities
4.7 Registration Rights Agreement among Symons International
Group, Inc., SIG Capital Trust I and the Initial Purchasers,
dated August 11, 1997
5.1 5.1 Opinion of Dann Pecar Newman & Kleiman, P.C. as to
legality of the Exchange Notes and the Exchange Guarantee to
be issued by Symons International Group, Inc.
5.2 Opinion of Richards, Layton & Finger as to legality of the
Exchange Preferred Securities to be issued by SIG Capital
Trust I
8 Opinion of Dann Pecar Newman & Kleiman, P.C. as to certain
federal income tax matters
10 The GS Funds Stock Purchase Agreement
12.1 Computation of ratio of earnings to combined fixed charges
and preferred stock dividends
21 Subsidiaries of Symons International Group, Inc.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Dann Pecar Newman & Kleiman, P.C. (included in
Exhibit 5.1)
23.3 Consent of Richards, Layton & Finger (included in Exhibit
5.2)
24 Power of Attorney of certain officers and directors of
Symons International Group, Inc.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act a trustee under the Amended and Restated
Declaration of Trust of SIG Capital Trust I
25.3 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Exchange Guarantee for
the benefit of the holders of Exchange Preferred Securities
of SIG Capital Trust I
E-1
<PAGE>
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
- ------------------
*Incorporated by reference to the similarly designated
exhibit to the Registration Statement of Symons International Group, Inc. on
S-1, Registration No. 333-9129.
E-2
Exhibit 4.1
-----------------------------------------------------------------------
SYMONS INTERNATIONAL GROUP, INC.
As Issuer
WILMINGTON TRUST COMPANY
As Trustee
------------------
SENIOR SUBORDINATED INDENTURE
Dated as of August 12, 1997
------------------
-----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...... 1
Section 1.1. Definitions................................................. 1
Section 1.2. Compliance Certificate and Opinions......................... 15
Section 1.3. Form of Documents Delivered to Trustee...................... 16
Section 1.4. Acts of Holders; Record Date................................ 16
Section 1.5. Notices, Etc., to Trustee and Company....................... 17
Section 1.6. Notice to Holders; Waiver................................... 17
Section 1.7. Conflict with Trust Indenture Act........................... 17
Section 1.8. Effect of Headings and Table of Contents.................... 18
Section 1.9. Successors and Assigns...................................... 18
Section 1.10. Separability Clause......................................... 18
Section 1.11. Acknowledgement of Rights................................... 18
Section 1.12. Governing Law............................................... 18
Section 1.13. Non-Business Days........................................... 18
Section 1.14. Duplicate Originals......................................... 18
ARTICLE II. SECURITY FORMS.............................................. 19
Section 2.1. Forms Generally............................................. 19
Section 2.2. Form of Face of Security.................................... 19
Section 2.3. Form of Reverse of Security................................. 20
Section 2.4. Additional Provisions Required in Global Security........... 23
Section 2.5. Legends..................................................... 24
Section 2.6. Form of Trustee's Certificate of Authentication............. 25
ARTICLE III. THE SECURITIES.............................................. 26
Section 3.1. Title and Terms............................................. 26
Section 3.2. Denominations............................................... 26
Section 3.3. Execution, Authentication, Delivery and Dating.............. 26
Section 3.4. Temporary Securities........................................ 27
Section 3.5. Registration, Registration of Transfer and Exchange......... 27
Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities............ 29
Section 3.7. Payment of Interest; Interest Rights Preserved.............. 29
Section 3.8. Persons Deemed Owners....................................... 31
Section 3.9. Cancellation................................................ 31
Section 3.10. Computation of Interest..................................... 32
Section 3.11. Right of Set-Off............................................ 32
Section 3.12. Agreed Tax Treatment........................................ 32
Section 3.13. CUSIP Numbers............................................... 32
ARTICLE IV. SATISFACTION AND DISCHARGE.................................. 32
Section 4.1. Satisfaction and Discharge of Indenture..................... 32
Section 4.2. Application of Trust Money; Reinstatement................... 33
Section 4.3. Satisfaction, Discharge and Defeasance of Securities........ 34
<PAGE>
ARTICLE V. REMEDIES.................................................... 35
Section 5.1. Events of Default........................................... 35
Section 5.2. Acceleration of Maturity; Rescission and Annulment.......... 36
Section 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee.................................................. 37
Section 5.4. Trustee May File Proofs of Claim............................ 38
Section 5.5. Trustee May Enforce Claims Without Possession of
Securities.................................................. 38
Section 5.6. Application of Money Collected.............................. 39
Section 5.7. Limitation on Suits......................................... 39
Section 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest........................................ 40
Section 5.9. Restoration of Rights and Remedies.......................... 0
Section 5.10. Rights and Remedies Cumulative.............................. 40
Section 5.11. Delay or Omission Not Waiver................................ 40
Section 5.12. Control by Holders.......................................... 40
Section 5.13. Waiver of Past Defaults..................................... 41
Section 5.14. Undertaking for Costs....................................... 41
Section 5.15. Waiver of Usury, Stay or Extension Laws..................... 42
ARTICLE VI. THE TRUSTEE................................................. 42
Section 6.1. Certain Duties and Responsibilities......................... 42
Section 6.2. Notice of Defaults.......................................... 43
Section 6.3. Certain Rights of Trustee................................... 43
Section 6.4. Not Responsible for Recitals or Issuance of Securities...... 44
Section 6.5. May Hold Securities......................................... 44
Section 6.6. Money Held in Trust......................................... 44
Section 6.7. Compensation and Reimbursement.............................. 44
Section 6.8. Disqualification; Conflicting Interests..................... 45
Section 6.9. Corporate Trustee Required; Eligibility..................... 45
Section 6.10. Resignation and Removal; Appointment of Successor........... 45
Section 6.11. Acceptance of Appointment by Successor...................... 46
Section 6.12. Merger, Conversion, Consolidation or Succession to Business. 46
Section 6.13. Preferential Collection of Claims Against Company........... 47
Section 6.14. Appointment of Authenticating Agent......................... 47
ARTICLE VII. HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY .......... 49
Section 7.1. Company to Furnish Trustee Names and Addresses of Holders... 49
Section 7.2. Preservation of Information, Communications to Holders...... 49
Section 7.3. Reports by Trustee.......................................... 49
Section 7.4. Reports by Company.......................................... 49
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE........ 50
Section 8.1. Company May Consolidate, Etc., Only on Certain Terms........ 50
Section 8.2. Successor Corporation Substituted........................... 50
ARTICLE IX. SUPPLEMENTAL INDENTURES..................................... 51
Section 9.1. Supplemental Indentures Without Consent of Holders.......... 51
Section 9.2. Supplemental Indentures with Consent of Holders............. 52
Section 9.3. Execution of Supplemental Indentures........................ 53
Section 9.4. Effect of Supplemental Indentures........................... 53
Section 9.5. Conformity with Trust Indenture Act......................... 53
Section 9.6. Reference in Securities to Supplemental Indentures.......... 53
<PAGE>
ARTICLE X. COVENANTS................................................... 53
Section 10.1. Payment of Principal, Premium and Interest.................. 53
Section 10.2. Maintenance of Office or Agency............................. 53
Section 10.3. Money for Security Payments to be Held in Trust............. 54
Section 10.4. Existence................................................... 55
Section 10.5. Maintenance of Properties................................... 55
Section 10.6. Payment of Taxes and Other Claims........................... 55
Section 10.7. Maintenance of Insurance.................................... 55
Section 10.8. Limitation on Incurrence of Indebtedness.................... 56
Section 10.9. Limitation on Restricted Payments........................... 57
Section 10.10. Limitation on Restrictions on Distributions from
Subsidiaries............................................... 57
Section 10.11. Senior Subordinated Indebtedness; Liens.................... 58
Section 10.12. Limitation on Affiliate Transactions....................... 58
Section 10.13. Limitation on Sales of Assets and Subsidiary Stock......... 59
Section 10.14. Change of Control.......................................... 60
Section 10.15. Statement as to Compliance and Default..................... 60
Section 10.16. Ownership of the Trust..................................... 61
Section 10.17. Waiver of Certain Covenants................................ 61
Section 10.18. Payment of Expenses........................................ 61
ARTICLE XI. REDEMPTION OF SECURITIES .................................. 62
Section 11.1. Applicability of This Article.............................. 62
Section 11.2. Election to Redeem; Notice to Trustee...................... 62
Section 11.3. Selection of Securities to be Redeemed..................... 62
Section 11.4. Notice of Redemption....................................... 63
Section 11.5. Deposit of Redemption Price................................ 63
Section 11.6. Payment of Securities Called for Redemption................ 63
Section 11.7. Company's Right of Redemption.............................. 64
ARTICLE XII. SUBORDINATION OF SECURITIES ............................... 64
Section 12.1. Securities Subordinate to Senior Indebtedness.............. 64
Section 12.2. Payment Over of Proceeds Upon Dissolution, Etc............. 64
Section 12.3. Prior Payment to Senior Indebtedness Upon Acceleration
of Securities.............................................. 65
Section 12.4. No Payment When Specified Senior Indebtedness in Default... 66
Section 12.5. Payment Permitted If No Default............................ 66
Section 12.6. Subrogation to Rights of Holders of Senior Indebtedness.... 67
Section 12.7. Provisions Solely to Define Relative Rights................ 67
Section 12.8. Trustee to Effectuate Subordination........................ 67
Section 12.9. No Waiver of Subordination Provisions...................... 67
Section 12.10. Notice to Trustee.......................................... 68
Section 12.11. Reliance on Judicial Order or Certificate of Liquidating
Agent...................................................... 68
Section 12.12. Trustee Not Fiduciary for Holders of Senior Indebtedness... 68
Section 12.13. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights........................... 68
Section 12.14. Article Applicable to Paying Agents........................ 68
Section 12.15. Certain Conversions or Exchanges Deemed Payment............ 69
<PAGE>
ARTICLE XIII. EXTENSION OF INTEREST PAYMENT PERIOD....................... 69
Section 13.1. Extension of Interest Payment Period....................... 69
Section 13.2. Notice of Extension........................................ 70
EXHIBITS
Exhibit A Amended and Restated Declaration of Trust of SIG Capital Trust I
<PAGE>
SIG CAPITAL TRUST I
Reconciliation and tie between the Trust Indenture Act of 1939 (including
cross-references to provisions of Sections 310 to and including 317 which,
pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the
Trust Reform Act of 1990, are a part of and govern the Indenture whether or not
physically contained therein) and the Senior Subordinated Indenture, dated as of
August 12, 1997.
Trust Indenture Indenture
Act Section Section
- --------------- ---------
ss.310 (a) (1), (2) and (5)................................. 6.9
(a) (3).............................................. Not Applicable
(a) (4).............................................. Not Applicable
(b).................................................. 6.8, 6.10
(c).................................................. Not Applicable
ss.311 (a).................................................. 6.13
(b).................................................. 6.13
(b) (2).............................................. 6.13
ss.312 (a).................................................. 7.1, 7.2(a)
(b).................................................. 7.2(b)
(c).................................................. 7.2(c)
ss.313 (a).................................................. 7.3(a)
(b).................................................. 7.3(a)
(c).................................................. 7.3(a), 7.3(b)
(d).................................................. 7.3(c)
ss.314 (a) (1), (2) and (3)................................. 7.4
(a) (4).............................................. 10.15
(b).................................................. Not Applicable
(c) (1).............................................. 1.2
(c) (2).............................................. 1.2
(c) (3).............................................. Not Applicable
(d).................................................. Not Applicable
(e).................................................. 1.2
(f).................................................. Not Applicable
ss.315 (a).................................................. 6.1(a)
(b).................................................. 6.2
(c).................................................. 6.1(b)
(d).................................................. 6.1(c)
(d) (1).............................................. 6.1(a) (1)
(d) (2).............................................. 6.1(c) (2)
(d) (3).............................................. 6.1(c) (3)
(e).................................................. 5.14
ss.316 (a).................................................. 1.1
(a) (1) (A).......................................... 5.12
(a) (1) (B).......................................... 5.13
(a) (2).............................................. Not Applicable
(b).................................................. 5.8
(c).................................................. 1.4(f)
ss.317 (a) (1).............................................. 5.3
(a) (2).............................................. 5.4
(b).................................................. 10.3
ss.318 (a).................................................. 1.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Senior Subordinated Indenture.
<PAGE>
SENIOR SUBORDINATED INDENTURE, dated as of August 12, 1997, among SYMONS
INTERNATIONAL GROUP, INC., a corporation organized under the laws of the State
of Indiana (hereinafter called the "Company") having its principal office at
4720 Kingsway Drive, Indianapolis, Indiana 46205, and WILMINGTON TRUST COMPANY,
a Delaware banking corporation duly organized and existing under the laws of the
State of Delaware, as Trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its 9 1/2% Senior Subordinated Notes
due August 15, 2027 (hereinafter called the "Securities" or "Security") of
substantially the tenor hereinafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance by SIG Capital Trust I, a Delaware business trust (the "Trust"), of the
Trust Preferred Securities (the "Preferred Securities") and Common Securities in
such Trust (the "Common Securities" and, collectively with the Preferred
Securities, the "Trust Securities"), and to provide the terms and conditions
upon which the Securities are to be authenticated, issued and delivered.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the Company
and to make this Indenture a valid agreement of the Company and in accordance
with its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of
the premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities, as follows:
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) All other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(4) Unless otherwise specifically set forth herein, all calculations
or determinations of a Person shall be performed or made on a consolidated
basis in accordance with generally accepted accounting principles; and
(5) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article VI, are defined in that
Article.
"Act" when used with respect to any Holder has the meaning specified
in Section 1.4.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Subsidiary as a result of the acquisition of such
Capital
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Stock by the Company or another Subsidiary; or (iii) Capital Stock constituting
a minority interest in any Person that at such time is a Subsidiary; provided
that any such Subsidiary described in clauses (ii) or (iii) above is primarily
engaged in a Related Business.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided that an Affiliate of the Company
shall not be deemed to include the Trust. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 10.9, 10.12 and 10.13 only, Affiliate shall also mean any
beneficial owner of Capital Stock representing 5% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of rights
or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Affiliate Transaction" has the meaning specified in Section 10.12(a).
"Approved Lender" has the meaning specified under the definition of
"Temporary Cash Investments."
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of any
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Subsidiary),
(ii) all or substantially all the assets of any division or line of business of
the Company or any Subsidiary or (iii) any other assets of the Company or any
Subsidiary outside of the ordinary course of business of the Company or such
Subsidiary (other than, in the case of (i), (ii) and (iii) above, (y) a
disposition by a Subsidiary to the Company or by the Company or a Subsidiary to
a Wholly Owned Subsidiary and (z) for purposes of Section 10.13 only, a
disposition that constitutes a Restricted Payment permitted by Section 10.9).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities.
"Blockage Notice" has the meaning specified in Section 12.4.
"Board of Directors" means, with respect to the Company or a
Subsidiary, as the case may be, the Board of Directors of such person or any
committee thereof duly authorized to act on behalf of such Board (or other
body).
"Board Resolution" means, with respect to the Company, a copy of a
resolution certified by the Secretary or an Assistant Secretary to have been
duly adopted by the Board of Directors, or such committee of the Board of
Directors or officers of the Company to which authority to act on behalf of the
Board of Directors has been delegated, and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday,
(ii) a day on which banking institutions in The City of New York are authorized
or required by law or executive order to remain closed or (iii) a day on which
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the Corporate Trust Office of the Trustee or, with respect to the Preferred
Securities, the Corporate Trust Office of the Preferred Trustee under the
Declaration, is closed for business.
"Capital Lease Obligations" means an obligation that is required to
be classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means any transaction or series of transactions
in which any Person or group (within the meaning of Rule 13d-5 under the
Exchange Act and Section 13(d) and 14(d) of the Exchange Act) acquires all or
substantially all of the Company's assets or becomes the direct or indirect
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), by way of
merger, consolidation, other business combination or otherwise, of greater than
50% of the total voting power (on a fully diluted basis as if all convertible
securities had been converted and all options and warrants had been exercised)
entitled to vote in the election of directors of the Company or the Surviving
Person (if other than the Company).
"Change of Control Triggering Event" means the occurrence of a Change
of Control.
"Collateral Agent" means Wilmington Trust Company or any successor
Trustee under this Indenture and any Collateral Agent appointed as provided in
this Indenture.
"Commission" means the United States Securities and Exchange
Commission.
"Common Securities" has the meaning specified in the first
paragraph of the Recitals to this Indenture.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor corporation shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Guarantees" means the Common Securities Company Guarantee,
the Preferred Securities Company Guarantee, the Exchange Common Securities
Company Guarantee and the Exchange Preferred Securities Company Guarantee.
"Common Securities Company Guarantee" means the guarantee by the
Company of distributions on the Common Securities of the Trust to the extent
provided in the Common Securities Guarantee Agreement, dated as of August 12,
1997.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by any two members of the
Board of Directors and delivered to the Trustee.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date of such determination to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided that (1)
if the Company or any Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period
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shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (2) if since the
beginning of such period the Company or any Subsidiary shall have made any Asset
Disposition, the EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets which are the
subject of such Asset Disposition for such period, or increased by an amount
equal to the EBITDA (if negative), directly attributable thereto for such period
and Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing Subsidiaries
in connection with such Asset Disposition for such period (or, if the Capital
Stock of any Subsidiary is sold, the Consolidated Interest Expense for such
period directly attributable to the Indebtedness of such Subsidiary to the
extent the Company and its continuing Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such period the
Company or any Subsidiary (by merger or otherwise) shall have made an Investment
in any Subsidiary (or any Person which becomes a Subsidiary) or an acquisition
of assets, including any acquisition of assets occurring in connection with a
transaction requiring a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period and (4) if
since the beginning of such period any Person (that subsequently became a
Subsidiary or was merged with or into the Company or any Subsidiary since the
beginning of such period) shall have made any Asset Disposition, any Investment
or acquisition of assets that would have required an adjustment pursuant to
clause (2) or (3) above if made by the Company or a Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Subsidiaries, plus, to the
extent not included in such total interest expense, and to the extent incurred
by the Company or its Subsidiaries, (i) interest expense attributable to capital
leases, (ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), (vii) Preferred Stock dividends in
respect of all Preferred Stock held by Persons other than the Company or a
Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments
in discontinued operations, (ix) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by the Company or any
Subsidiary and (x) the cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or trust
to pay interest or fees to any Person (other than the Company) in connection
with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of
the Company and its consolidated Subsidiaries; provided that there shall not be
included in such Consolidated Net Income: (i) any net income of any Person if
such Person is not a Subsidiary, except that (A) subject to the exclusion
contained in clause (iv) below, the Company's equity in the net income of any
such Person for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Person during such
period to the Company or a Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to a Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's equity
in a net loss of any such
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Person for such period shall be included in determining such Consolidated Net
Income; (ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; (iii) any net income of any Subsidiary that is not a
Wholly Owned Subsidiary if such Subsidiary is subject to contractual,
governmental or regulatory restrictions, directly or indirectly, on the payment
of dividends or the making of distributions by such Subsidiary, directly or
indirectly, to the Company, except that (A) subject to the exclusion contained
in clause (iv) below, the Company's equity in the net income of any such
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Subsidiary during
such period to the Company or another Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to
another Subsidiary that is not a Wholly Owned Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss of any such
Subsidiary for such period shall be included in determining such Consolidated
Net Income; (iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company or its consolidated Subsidiaries
(including pursuant to any sale and leaseback arrangement) that is not sold or
otherwise disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition of any Capital Stock of any
Person; (v) extraordinary gains or losses; and (vi) the cumulative effect of a
change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available prior to the taking of any action for the purpose of which the
determination is being made, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Corporate Trust Office" means the principal office of the Trustee
in Wilmington, Delaware.
"Corporation" means a corporation, association, partnership, business
trust or other business entity.
"Currency Agreement" means any foreign currency exchange contract,
currency swap agreement or other similar agreement or arrangement designed and
entered into to protect the Company or any Subsidiary against fluctuations in
currency interest rates.
"Credit Agreement" means the Business Loan Agreement, dated as of
June 18, 1997, among IGF Insurance Company and Brenton Bank, National
Association, as lender, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection with such Business
Loan Agreement, in each case as amended, modified, renewed, refunded, replaced,
restated or refinanced from time to time, provided that such amendment,
modification, renewal, refunding, replacement, restatement or refinancing (i)
does not increase the aggregate principal amount of Indebtedness that may be
outstanding under such Business Loan Agreement except to the extent that such
additional principal amount of Indebtedness could be incurred pursuant to
Section 10.8(b), and (ii) does not contain, with respect to any Subsidiary, any
encumbrances or restrictions of the type contained in clauses (i), (ii) and
(iii) of Section 10.10 that are less favorable to the Holders of Securities than
the encumbrances and restrictions with respect to such Subsidiary contained in
such Business Loan Agreement prior thereto.
"Declaration" means the Amended and Restated Declaration of Trust
substantially in the form attached hereto as Exhibit B, as amended from time to
time.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7.
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"Definitive Securities" means those Securities issued in fully
registered, certificated form not otherwise in global form.
"Depository" means, with respect to the Securities issuable or issued
in whole or in part in the form of one or more Global Securities, the Person
designated as Depository by the Company (or any successor thereto).
"Disqualified Stock" means, with respect to any Person, any Capital
Stock that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Securities; provided that any Capital Stock that would
not constitute Disqualified Stock but for provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such Capital
Stock upon the occurrence of an "asset sale" or "change of control" occurring
prior to the first anniversary of the Stated Maturity of the Securities shall
not constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are not more favorable to the
holders of such Capital Stock than the provisions of Sections 10.13 and 10.14.
"Dollar" means the currency of the United States of America that, as
at the time of payment, is legal tender for the payment of public and private
debts.
"EBITDA" for any period means the sum of Consolidated Net Income,
plus Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its Subsidiaries, (b) depreciation expense and (c) amortization
expense, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary that is not a Wholly Owned Subsidiary shall be
added to Consolidated Net Income to compute EBITDA only to the extent (and in
the same proportion) that the net income of such Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Subsidiary or its stockholders.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Common Securities Company Guarantee" means the
Common Securities Company Guarantee Agreement, issued pursuant to an
Exchange Offer.
"Exchange Offer" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Company to exchange Exchange Trust
Securities for Trust Securities, to exchange an Exchange Preferred Securities
Company Guarantee for a Preferred Securities Company Guarantee and to exchange
an Exchange Common Securities Company Guarantee for a Common Securities Company
Guarantee and (ii) by the Trust to exchange Exchange Securities for Initial
Securities.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Exchange Preferred Securities Company Guarantee" means the
Preferred Securities Company Guarantee Agreement, issued pursuant to an
Exchange Offer.
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"Exchange Securities" means the Company's 9 1/2% Senior Subordinated
Notes due 2027, issued pursuant to an Exchange Offer, as authenticated and
issued under this Indenture.
"Exchange Trust Securities" means the Trust Securities issued
pursuant to an Exchange Offer.
"Extension Period" has the meaning set forth in Section 13.1.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
Commission.
"Global Security" means a Security in the form prescribed in Section
2.4 evidencing all or part of the Securities, issued to the Depository or its
nominee for such series, and registered in the name of such Depository or its
nominee.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is unconditionally guaranteed by
the United States of America and which, in either case, are full faith and
credit obligations of the United States of America and are not callable or
redeemable at the option of the issuer thereof and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act of 1933, as amended) as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the holder
of such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of interest on or
principal of the Government Obligation evidenced by such depository receipt.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any Person and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term Guarantee used as a verb has a corresponding meaning.
"Guarantor" means any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means a Person in whose name a Security is registered in the
Securities Register. The Preferred Trustee shall be the initial Holder of the
Securities.
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"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided that any Indebtedness or Capital Stock of a Person existing
at the time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary. The term "Incurrence" when used as a noun
shall have a correlative meaning. The accretion of principal of a non-interest
bearing or other discount security shall be deemed the Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property or services, all conditional
sale obligations of such Person and all obligations of such Person under any
title retention agreement (other than (x) customary reservations or retentions
of title under agreements with suppliers entered into in the ordinary course of
business, (y) trade debt incurred in the ordinary course of business and due
within six months of the incurrence thereof and (z) obligations incurred under a
pension, retirement or deferred compensation program or arrangement regulated
under the Employee Retirement Income Security Act of 1974, as amended, or the
laws of a foreign government); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, bank guaranty, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit and bank guaranties (A) not made under the Credit Agreement
and (B) securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any subsidiary of such Person, any Preferred Stock
(but excluding, in each case, any accrued dividends); (vi) all obligations of
the type referred to in clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee; (vii) all obligations of the
type referred to in clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured; and (viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively, and shall include the terms of the Securities established as
contemplated by Section 3.1.
"Initial Securities" means the Company's 9 1/2% Senior Subordinated
Notes due 2027, as authenticated and issued under this Indenture.
"Interest Payment Date" means February 15 and August 15 of each year,
commencing February 15, 1998.
"Interest Rate" means the rate of interest specified or determined as
specified as being the rate of interest payable on the Securities.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
and entered into to protect the Company or any Subsidiary against fluctuations
in interest rates.
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"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person.
"Investment Company Event" means the receipt by the Company of an
Opinion of Counsel, rendered by an independent law firm having experience in tax
and securities matters, to the effect that, as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the Trust is or will be considered an
"investment company" that is required to be registered under the 1940 Act, which
Change in 1940 Act Law becomes effective on or after the date of original
issuance of the Preferred Securities of the Trust.
"Issue Date" means the date on which the Securities are
originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Marketable Securities" means securities listed on a national
securities exchange which have a minimum weekly trading volume for the most
recently completed 52 weeks of at least 100,000 shares.
"Maturity" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
non-cash form) in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed in such Asset Disposition and retained by the
Company or any Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
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"Officers' Certificate" means a certificate signed by (a) the
Chairman and Chief Executive Officer, President or Vice President, and by the
Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant
Secretary, or (b) any two members of the Board of Directors of the Company, and
delivered to the appropriate Trustee.
"Opinion of Counsel" or "opinion of counsel" means, as to the
Company, a written opinion of counsel, who may be counsel for the Company, as
the case may be, but, other than in connection with the issuance of the
Securities, not an employee of any thereof, and who shall be reasonably
acceptable to the Trustee.
"Outstanding" means, when used in reference to any Securities, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any Paying
Agent in trust for the Holders of such Securities (other than the Company) in
trust or set aside and segregated in trust by the Company (if the Company shall
act as its own Paying Agent) for the Holders of such Securities; provided that
if such Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been paid
pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented
that any such Securities are held by Holders in whose hands such Securities are
valid, binding and legal obligations of the Company; and
(iv) Securities which have been defeased pursuant to Section 4.3
hereof; provided that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor. Upon the written request of the
Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Securities, if any, known by the Company
to be owned or held by or for the account of the Company, or any other obligor
on the Securities or any Affiliate of the Company or such obligor, and, subject
to the provisions of Section 6.1, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Securities not listed therein are Outstanding for the
purpose of any such determination.
"Payment Blockage Period" has the meaning specified in Section
12.4(b).
"Paying Agent" means the Trustee or any Person authorized by the
Company to pay the principal of or interest on any Securities on behalf of the
Company.
"Permitted Investment" means an Investment by the Company or any
Subsidiary in (i) a Person that will, upon the making of such Investment, be or
become a Subsidiary; provided that the primary business of such Subsidiary is a
Related Business; (ii) a Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Subsidiary; provided that such
Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) any demand deposit account
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with an Approved Lender; (v) receivables owing to the Company or any Subsidiary
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided that such trade
terms may include such concessionary trade terms as the Company or any such
Subsidiary deems reasonable under the circumstances; (vi) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vii) loans or advances to employees made in
the ordinary course of business consistent with past practices of the Company or
such Subsidiary; (viii) stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to the Company or
any Subsidiary or in satisfaction of judgments; (ix) any Person to the extent
such Investment represents the non-cash portion of the consideration received
for an Asset Disposition as permitted pursuant to Section 10.13; and (x) any
Affiliate (the primary business of which is a Related Business) that is not a
Subsidiary, provided that the aggregate of all such Investments outstanding at
any one time under this clause (x) shall not exceed $1,000,000.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency, instrumentality or political subdivision thereof, or
any other entity.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
security authenticated and delivered under Section 3.6 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Preferred Securities" has the meaning specified in the first para-
graph of the Recitals to this Indenture.
"Preferred Securities Company Guarantee" means the guarantee by the
Company of distributions on the Preferred Securities of the Trust to the extent
provided in the Preferred Securities Guarantee Agreement, dated August 12, 1997.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Preferred Trustee" means Wilmington Trust Company, a Delaware
banking corporation duly organized and existing under the laws of the State of
Delaware, solely in its capacity as Preferred Trustee of the Trust and not in
its individual capacity, or its successor in interest in such capacity, or any
successor Preferred Trustee appointed as provided in the Declaration.
"Principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Proceeding" has the meaning specified in Section 12.2.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Subsidiary existing on the Issue Date or
Incurred in compliance with the Indenture including Indebtedness that Refinances
Refinancing Indebtedness; provided that (i) such Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced and (iii) such Refinancing
Indebtedness has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus fees and expenses,
including any premium and defeasance costs) under the Indebtedness being
Refinanced; provided that Refinancing Indebtedness shall not include (x)
Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (y)
Indebtedness of the Company or a Subsidiary that Refinances Indebtedness of
another Subsidiary.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 12, 1997, by and among the Company, the Trust and
the initial purchasers named therein as such agreement may be amended, modified
or supplemented from time to time.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the date which is the fifteenth day immediately preceding
such Interest Payment Date (whether or not a Business Day).
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and its Subsidiaries on the Issue
Date.
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee from time to time to administer
its corporate trust matters.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock)) and
dividends or distributions payable solely to the Company or a Subsidiary, and
other than pro rata dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Subsidiary held by any Affiliate of the Company (other than a
Subsidiary), including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company that is not Disqualified Stock),
(iii) the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of acquisition)
or (iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" or "Security" means, collectively, the Initial Securi-
ties and the Exchange Securities.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.
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"Senior Indebtedness" means, with respect to the Company, (i)
Indebtedness of the Company such Person, whether outstanding on the Issue Date
or thereafter incurred and (ii) accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such Person, whether or not the claim for such
interest is allowed as a claim after such filing) in respect of (A) any
Indebtedness of such Person under the Credit Agreement, (B) Indebtedness of such
Person for money borrowed and (C) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are subordinate in right of payment to the Securities; provided that
Senior Indebtedness shall not include (1) any obligation of such Person to any
subsidiary of such Person, (2) any liability for federal, state, local or other
taxes owed or owing by such person, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of such Person (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior in any respect to any other Indebtedness
or other obligation of such Person or (5) that portion of any Indebtedness which
at the time of incurrence is incurred in violation of the Indenture.
"Senior Subordinated Indebtedness" means the Securities and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Securities in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company that is not Senior Indebtedness.
"Senior Subordinated Payment" has the meaning specified in Section
12.2.
"S&P" means Standard & Poor's Corporation and its successors.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company and the Trust pursuant to the provisions of Section
2(b) of the Registration Rights Agreement on an appropriate form under Rule 415
under the Securities Act, or any similar rule that may be adopted by the
Commission, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Specified Senior Indebtedness" means, with respect to the Company,
Senior Indebtedness of such Person permitted under the Indenture the outstanding
principal amount of which is more than $10,000,000 at the time of determination.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the Holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
"Subsidiary" means a corporation (as defined herein) of which more
than 50% of the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by the
Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
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"Surviving Person" means, with respect to any Person involved in any
merger, consolidation or other business combination or the sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
such Person's assets, the Person formed by or surviving such transaction or the
Person to which such disposition is made.
"Tax Event" means that the Company shall have obtained an opinion of
an independent tax counsel experienced in such matters to the effect that, as a
result of (a) any amendment to or change (including any announced proposed
change) in the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (b) any
amendment to or change in an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of any
judicial decision or regulatory determination on or after the date of issuance
of the Preferred Securities), which amendment or change is effective or which
proposed change, interpretation or pronouncement is announced on or after the
date of issuance of the Preferred Securities, there is more than an
insubstantial risk that (i) the Trust is or will be subject to United States
federal income tax with respect to interest received or accrued on the
Securities, (ii) interest payable to the Trust on the Securities is not or will
not be deductible for United States federal income tax purposes or (iii) the
Trust is or will be subject to more than a de minimis amount of other taxes,
duties, assessments or other governmental charges of whatever nature imposed by
the United States or any other taxing authority.
"Taxes" means all taxes (including penalties, interest and other
liabilities related thereto) imposed or levied by or on behalf of the United
States of America or of any territory, authority or agency thereof having power
to tax.
"Temporary Cash Investments" means any of the following: (a)
securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof), having maturities of not more than twelve months from the date of
acquisition, (b) time deposits and certificates of deposit, eurodollar time
deposits and eurodollar certificates of deposit of (i) any lender under the
Credit Agreement, or (ii) any United States commercial bank of recognized
standing (y) having capital and surplus in excess of $500,000,000 and (z) whose
short-term commercial paper rating from S&P is at least A-1 or the equivalent
thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank
being an "Approved Lender"), in each case with maturities of not more than 270
days from the date of acquisition, (c) commercial paper and variable or fixed
rate notes issued by an Approved Lender (or by the parent company thereof) and
maturing within six months of the date of acquisition, (d) repurchase agreements
entered into by a Person with a bank or trust company (including any of the
lenders under the Credit Agreement) or recognized securities dealer having
capital and surplus in excess of $500,000,000 for (i) direct obligations issued
by or fully guaranteed by the United States of America, (ii) time deposits or
certificates of deposit described under subsection (b) above, or (iii)
commercial paper or other notes described under subsection (c) above, in which,
in each such case, such bank, trust company or dealer shall have a perfected
first priority security interest (subject to no other Liens) and having, on the
date of purchase thereof, a fair market value of at least 100% of the amount of
the repurchase obligations, (e) obligations of any State of the United States or
any political subdivision thereof, the interest with respect to which is exempt
from federal income taxation under Section 103 of the U.S. Internal Revenue
Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's,
respectively, and maturing within three years from the date of acquisition
thereof, (f) Investments in municipal auction preferred stock (i) rated AAA (or
the equivalent thereof) or better by S&P or Aaa (or the equivalent thereof) or
better by Moody's and (ii) with dividends that reset at least once every 365
days and (g) Investments, classified in accordance with GAAP as current assets,
in money market investment programs registered under the Investment Company Act
of 1940, as amended, which are administered by reputable financial institutions
having capital of at least $100,000,000 and the portfolios of which are limited
to Investments of the character described in clauses (a), (b), (c), (e) and (f)
above.
"Trust" has the meaning specified in the first paragraph of the
Recitals to this Indenture.
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"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
amended and as in force at the date as of which this Indenture was executed,
except as provided in Section 9.5; provided that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means,
to the extent required by any such amendment, the Trust Indenture Act of 1939 as
so amended.
"Trust Securities" has the meaning specified in the first paragraph
of the Recitals to this Indenture.
"Vice President" when used with respect to the Company or the Trustee
means any duly appointed vice president, whether or not designated by a number
or a word or words added before or after the title "vice president."
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares and shares held by other Persons
to the extent such shares are required by applicable law to be held by a Person
other than the Company or a Subsidiary) is owned by the Company or by one or
more Wholly Owned Subsidiaries, or by the Company and one or more Wholly Owned
Subsidiaries.
Section 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition precedent or covenant provided for in this Indenture (other than the
certificates provided pursuant to Section 10.15) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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Section 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless the individual attorneys actively engaged in the transaction
which is the subject matter of such opinion in the office of such counsel have
actual knowledge that the certificate or opinion or representations with respect
to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4. Acts of Holders; Record Date.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments is or are
delivered to the Trustee, and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section 1.4.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
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(f) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to take any action under
this Indenture by vote or consent. Except as otherwise provided herein, such
record date shall be the later of 30 days prior to the first solicitation of
such consent or vote or the date of the most recent list of Securityholders
furnished to the Trustee pursuant to Section 7.1 prior to such solicitation. If
a record date is fixed, those Persons who were Securityholders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to take such action by vote or consent or to revoke any vote or consent
previously given, whether or not such persons continue to be Holders after such
record date, provided that unless such vote or consent is obtained from the
Holders (or their duly designated proxies) of the requisite principal amount of
Outstanding Securities prior to the date which is the 90th day after such record
date, any such vote or consent previously given shall automatically and without
further action by any Holder be cancelled and of no further effect.
Section 1.5. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust office, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose (except as otherwise provided in Sections 5.1 and 5.2 hereof)
hereunder if in writing and mailed, first class, postage prepaid, in the case of
the Company to it at the address of its principal office specified in the first
paragraph of this Indenture or at any other address previously furnished in
writing to the Trustee by the Company; provided that all notices sent to the
Company pursuant to this Indenture shall be sent in copy to Symons International
Group, Inc. (4720 Kingsway Drive, Indianapolis, Indiana 46205, Attn: David L.
Bates) and shall be effective five Business Days after such mailing.
Section 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first class postage prepaid, to each Holder
affected by such event, at the address of such Holder as it appears in the
Securities Register, not later than the latest date (if any), and not earlier
than the earliest date (if any), prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 1.7. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required or deemed under the Trust
Indenture Act to be part of and govern this Indenture, the latter provision
shall control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
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Section 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its respective successors and assigns, whether so expressed or not.
Section 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.11. Acknowledgement of Rights.
The Company acknowledges that, with respect to any Securities held by
the Trust or a trustee of the Trust, if the Preferred Trustee of such Trust
fails to enforce its rights under this Indenture as the holder of the Securities
held as the assets of the Trust, any holder of the Trust Securities may
institute legal proceedings directly against the Company to enforce such
Preferred Trustee's rights under this Indenture without first instituting any
legal proceedings against such Preferred Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
principal of (or premium, if any) or interest on the Securities when due, the
Company acknowledges that a holder of Trust Securities may directly institute a
proceeding for enforcement of payment to such holder of the principal of (or
premium, if any) or interest on the Securities having a principal amount equal
to the aggregate liquidation amount of the Trust Securities of such holder on or
after the respective due date specified in the Securities.
Section 1.12. Governing Law.
THIS INDENTURE AND THE SECURITIES ENDORSED THEREON SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 1.13. Non-Business Days.
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day (and no interest shall
accrue for the period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be, until such next succeeding Business Day
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day (in each case
with the same force and effect as if made on the Interest Payment Date or
Redemption Date or at the Stated Maturity)).
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Section 1.14. Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
ARTICLE II. SECURITY FORMS
Section 2.1. Forms Generally.
The Securities and the Trustee's certificate of authentication shall
be in substantially the forms set forth in this Article.
Section 2.2. Form of Face of Security.
SYMONS INTERNATIONAL GROUP, INC.
9 1/2% Senior Subordinated Notes due August 15, 2027
No. $139,176,000
SYMONS INTERNATIONAL GROUP, INC., a corporation organized and
existing under the laws of Indiana (hereinafter called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to Wilmington Trust Company, or
registered assigns, the principal sum of $139,176,000 Dollars on August 15,
2027. The Company further promises to pay interest on said principal sum
semi-annually in arrears on February 15 and August 15 of each year, commencing
February 15, 1998, (each such date, an "Interest Payment Date") at the rate of 9
1/2% per annum until the principal hereof is paid or duly provided for or made
available for payment and on any overdue principal and (without duplication and
to the extent that payment of such interest is enforceable under applicable law)
on any interest which is in arrears at the rate of 9 1/2% per annum, compounded
semi-annually. The amount of interest payable for any period shall be computed
on the basis of twelve 30-day months and a 360-day year. The amount of interest
payable for any partial period shall be computed on the basis of the number of
days elapsed in a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on this Security is not a Business Day, then a
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date the payment was originally payable. A "Business Day" shall mean any
day other than (i) a Saturday or Sunday, (ii) a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or (iii) a day on which the Corporate Trust
Office of the Trustee, or, with respect to the Preferred Securities, the
principal office of the Preferred Trustee under the Declaration hereinafter
referred to for SIG Capital Trust I, is closed for business. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities, as defined
in the Indenture) is registered at the close of business on the Regular Record
Date for such interest installment, which shall be the date which is the
fifteenth day immediately preceding such Interest Payment Date (whether or not a
Business Day). Any such interest installment not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
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the Trustee, notice whereof shall be given to Holders not less than 10 days
prior to such Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.
Payments on this Security issued as a Global Security shall be made
in immediately available funds to the Depository. In the event that this
Security is issued in certificated form, the principal of (and premium, if any)
and interest on the Security will be payable at the office maintained by the
Company under the Indenture; provided that unless the Security is held by the
Trust or any permissible successor entity as provided under the Declaration in
the event of a merger, consolidation or amalgamation of the Trust, payment of
interest may be made at the option of the Company by check mailed to the address
of the person entitled thereto, as such address shall appear in the Register.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
actions as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: ___________
SYMONS INTERNATIONAL GROUP, INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
ATTEST:
By:
---------------------------------
Name:
Title:
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Section 2.3. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued under a Senior Subordinated
Indenture, dated as of August 12, 1997 (herein called the "Indenture"), between
the Company and Wilmington Trust Company, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
All terms used in this Security that are defined in the Indenture and
in the Amended and Restated Declaration of Trust, dated as of August 12, 1997,
as amended (the "Declaration"), for SIG Capital Trust I, shall have the meanings
assigned to them in the Indenture or the Declaration, as the case may be.
On or after August 15, 2007, the Company may, at its option, subject
to the terms and conditions of Article IV of the Indenture, redeem this Security
in whole at any time or in part from time to time, upon not less than 30 or more
than 60 days' notice, at the Redemption Prices (expressed as a percentage of
principal amount) set forth below plus accrued and unpaid interest, if any, to
the Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date) if redeemed during the 12-month period
beginning on August 15 of the years indicated below:
Percentage of
Year Principal
---------------
2007............................................. 104.750%
2008............................................. 103.167%
2009............................................. 101.583%
2010 and thereafter.............................. 100.000%
If a Tax Event or an Investment Company Event in respect of the Trust
shall occur and be continuing, the Company shall cause the Trustees (as defined
in the Indenture) to liquidate the Trust and cause Securities to be distributed
to the holders of the Trust Securities in liquidation of the Trust or, in the
event of a Tax Event only, may cause the Securities to be redeemed, in each
case, subject to and in accordance with the provisions of the Declaration and
subject to Article XI of the Indenture, within 90 days following the occurrence
of such Tax Event or Investment Company Event. Any redemption of the Securities
as a result of a Tax Event shall be in whole at 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the Redemption Date.
The Securities do not have the benefit of any sinking fund
obligations.
In the event of redemption of this Security in part only, a new
Security for the unredeemed portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
of all the Securities may be declared due and payable in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions for satisfaction, discharge and
defeasance at any time of the entire indebtedness of this Security upon
compliance by the Company with certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the Company and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
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obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in aggregate outstanding principal amount of the Securities affected thereby, on
behalf of the Holders of all Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to the Securities at the time Outstanding occurs
and is continuing, then and in every such case the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Outstanding Securities may
declare the principal amount of and interest on all the Securities to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that if the Trustee or such Holders fail to do
so, the Preferred Trustee shall have such right by a notice in writing to the
Company and the Trustee; and upon any such declaration such specified amount of
and the accrued interest on all the Securities shall become immediately due and
payable, provided that the payment of principal and interest on such Securities
shall remain subordinated to the extent provided in Article XII of the
Indenture.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and rate, and
in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained under Section 10.2 of
the Indenture duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof, for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Company shall have the right, at any time and from time to time
during the term of the Securities, to defer payments of interest by extending
the interest payment period of such Securities for a period not exceeding ten
consecutive semi-annual periods, including the first such semi-annual period
during such extension period, and not to extend beyond the Maturity Date of the
Securities (an "Extension Period""), at the end of which period the Company
shall pay all interest then accrued and unpaid together with interest thereon at
the rate specified for the Securities (to the extent that payment of such
interest is enforceable under applicable law). Before the termination of any
such Extension Period, the Company may further defer payments of interest by
further extending such Extension Period, provided that such Extension Period,
together with all such previous and further extensions within such Extension
Period, shall not exceed ten consecutive semi-annual periods, including the
first semi-annual period during such Extension Period, or extend beyond the
maturity date of the Securities. Upon the termination of any such Extension
Period and the payment of all accrued and unpaid interest and any additional
amounts then due, the Company may commence a new Extension Period, subject to
the foregoing requirements. The Company's election to so defer payments shall
not be deemed an Event of Default.
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During any such Extension Period, the Company has agreed that it will
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
Capital Stock (which includes common and preferred stock) or (ii) make any
payment of principal, interest or premium, if any, on or repay or repurchase or
prepay any debt securities of the Company that rank pari passu with or junior in
right of payment to the Securities or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any Subsidiary
of the Company if such guarantee ranks pari passu or junior in right of payment
to the Securities (other than (a) dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of, common stock
of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholder rights plan, or the issuance of stock under any
such plan in the future, or the prepayment or repurchase of any such rights
pursuant thereto, (c) payments under the Common Securities Company Guarantee or
the Preferred Securities Company Guarantee, (d) as a result of a
reclassification of the Company's Capital Stock or the exchange or the
conversion of one class or series of the Company's Capital Stock for another
class or series of the Company's Capital Stock, (e) the purchase of fractional
interests in shares of the Company's Capital Stock pursuant to the exchange or
conversion of such Capital Stock or the security being exchanged or converted,
and (f) purchases or issuances of Common Stock under any of the Company's stock
option, stock purchase, stock loan or other benefit plans for its directors,
officers or employees or any of the Company's dividend reinvestment plans, in
each case as now existing or hereafter established or amended). The Company's
election to so defer payments shall not be deemed an Event of Default.
The Company will have the right at any time to liquidate SIG Capital
Trust I and cause the Securities to be distributed to the holders of the Trust
Securities in liquidation of the Trust.
The Securities are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES THEREOF.
Section 2.4. Additional Provisions Required in Global Security.
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the
following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the
Depository. This Security is exchangeable for Securities registered in the
name of a Person other than the Depository or its nominee only in the
limited circumstances described in the Indenture and no transfer of this
Security (other than a transfer of this Security as a whole by the
Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository) may be
registered except in limited circumstances.
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Unless this Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to SYMONS
INTERNATIONAL GROUP, INC. or its agent for registration of transfer,
exchange or payment, and any Security issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative
of The Depository Trust Company and any payment hereon is made to Cede &
Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein."
Section 2.5. Legends.
Except as determined by the Company in accordance with applicable
law, each Initial Security and each Exchange Security of which the Holder is
either (A) a broker-dealer who purchased such Initial Security directly from the
Company for resale pursuant to Rule 144A or any other available exemption under
the Securities Act, (B) a Person participating in the distribution of the
Initial Securities, (C) a Person who is an affiliate (as defined in Rule 144
under the Securities Act) of the Company or (D) a qualified institutional buyer
shall bear the applicable legends relating to restrictions on transfers pursuant
to the securities laws in substantially the form set forth below:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (d) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATIONS UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3)
OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT
OF THE TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OF TRANSFER (i)
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (ii) PURSUANT TO CLAUSE (E) TO REQUIRE THAT THE TRANSFEROR
DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE
FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED AUGUST 7, 1997. SUCH
HOLDER FURTHER
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AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CAPITAL SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
If the Security is sold pursuant to Regulation S of the Securities Act:
THIS SECURITY HAS NOT BEEN 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 UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS
AVAILABLE.
Section 2.6. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within mentioned
Indenture.
as Trustee
By:
-------------------------------------
Authorized officer
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ARTICLE III. THE SECURITIES
Section 3.1. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $139,176,000
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.4,
3.5, 3.6, 9.6 or 11.6.
The Securities shall be known and designated as the "9 1/2% Senior
Subordinated Notes due August 15, 2027" of the Company. Their Stated Maturity
shall be August 15, 2027, at which time the Securities shall become due and
payable together with any accrued and unpaid interest thereon and they shall
bear interest at the rate of 9 1/2% per annum, from the Issue Date, payable
semi-annually in arrears on each Interest Payment Date subject to Article XIII,
to the Persons in whose name the Securities are registered at the close of
business on the Regular Record Date.
Interest on the Securities shall accrue from the most recent date on
which interest has been paid or, if no interest has been paid, from the Issue
Date. Interest in arrears shall accrue interest (compounded semi-annually) at
the same rate.
Payments on the Securities issued as a Global Security shall be made
in immediately available funds to the Depository. In the event that Securities
are issued in certificated form, the principal of (and premium, if any) and
interest on the Securities shall be payable at the office maintained by the
Company pursuant to Section 10.2; provided that unless the Securities are held
by the Trust or any permissible successor entity as provided under the
Declaration in the event of a merger, consolidation or amalgamation of the
Trust, payment of interest may be made at the option of the Company by check
mailed to the address of the persons entitled thereto, as such address shall
appear in the Register.
The Securities shall be redeemable as provided in Article XI.
The Securities shall be subordinated in right of payment to Senior
Indebtedness of the Company as provided in Article XII.
The Securities shall be subject to defeasance at the option of the
Company as provided in Section 4.3.
Section 3.2. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by any two
officers. The signature of any of these officers on the Securities may be manual
or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
Each Security shall be dated the date of its authentication.
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No Security endorsed thereon shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose, unless there appears
on such Security a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one of
its authorized officers.
Section 3.4. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for that purpose without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities,
the Company shall execute, and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of authorized
denominations having the same Issue Date and Stated Maturity, having the same
terms and like tenor. Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.
Section 3.5. Registration, Registration of Transfer and Exchange.
(a) Registration. The Company shall cause to be kept at the Corporate
Trust Office of the Trustee, a register in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. Such register is herein sometimes
referred to as the "Securities Register." The Trustee is hereby appointed
"Securities Registrar" for the purpose of registering Securities and transfers
of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated for that purpose the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
authorized denominations of a like aggregate principal amount, of the same Issue
Date and Stated Maturity.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations, of a like aggregate principal
amount, of the same Issue Date and Stated Maturity and having the same terms and
like tenor upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the same
debt and entitled to the same benefits under this Indenture as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
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No service charge shall be made to a Holder for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities.
The Company shall not be required to (i) issue, register the transfer
of or exchange Securities during a period beginning at the opening of business
15 days before the day of mailing of a notice of prepayment or any notice of
selection of Securities for prepayment and ending at the close of business on
the day of such mailing; or (ii) register the transfer of or exchange any
Security so selected for prepayment in whole or in part, except the unprepaid
portion of any Security being prepaid in part.
Notwithstanding any of the foregoing, any Global Security shall be
exchangeable pursuant to this Section 3.5 for Securities registered in the names
of Persons other than the Depository for such Global Security or its nominee
only if (i) such Depository notifies the Company that it is unwilling or unable
to continue as Depository for such Global Security or if at any time such
Depository ceases to be a clearing agency registered under the Exchange Act, as
amended, (ii) the Company executes and delivers to the Trustee a Company Order
that such Global Security shall be so exchangeable or (iii) there shall have
occurred and be continuing an Event of Default with respect to the Securities.
Any Global Security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for Securities registered in such names as such Depository
shall direct.
Notwithstanding any other provision in this Indenture, a Global
Security may not be transferred except as a whole by the Depository with respect
to such Global Security to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Neither the Company nor the Trustee shall be required to, pursuant to
the provisions of this Section, (a) issue, register the transfer of or exchange
any Security during a period beginning at the opening of business 15 days before
any selection for redemption of Securities pursuant to Article XI and ending at
the close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all Holders of Securities to be so
redeemed, and (b) register the transfer of or exchange any Security so selected
for redemption, in whole or in part, except, in the case of any Security to be
redeemed in part, any portion thereof not to be redeemed.
(b) Exchange of Initial Securities for Exchange Securities.
The Initial Securities may be exchanged for Exchange Securities pursuant to the
terms of the Exchange Offer. The Trustee shall make the exchange as follows:
The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(i) upon issuance of the Exchange Securities, the transactions con-
templated by the Exchange Offer have been consummated; and
(ii) the principal amount of Initial Securities properly tendered in
the Exchange Offer that are represented by a Global Security and the principal
amount of the Initial Securities properly tendered in the Exchange Offer that
are represented by Definitive Securities, the name of each holder of such
Definitive Securities, the principal amount at maturity properly tendered in the
Exchange Offer by each such holder and the name and address to which Definitive
Securities for Exchange Securities shall be registered and sent for each such
holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Exchange Securities have been
registered under Section 5 of the Securities Act and the Indenture has been
qualified under the Trust Indenture Act and (y) with respect to the matters set
forth in Section 3(p) of the Registration Rights Agreement and (iii) a Company
Order, shall authenticate (A) a Global Security for Exchange Securities in
aggregate principal amount equal to the aggregate principal amount of Initial
Securities as having been properly tendered and
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(B) Definitive Securities representing Exchange Securities registered in the
names of, and in the principal amounts indicated in, such Officers' Certificate.
If the principal amount at maturity of the Global Security for the
Exchange Securities is less then the principal amount at maturity of the Global
Security for the Initial Securities, the Trustee shall make an endorsement on
such Global Security for the Initial Securities indicating a reduction in the
principal amount at maturity represented thereby.
The Trustee shall deliver such Definitive Securities for Exchange to
the holders thereof as indicated in such Officers' Certificate.
Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Company or the Trustee to
save each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor, a new Security of like tenor and
principal amount, having the same Issue Date and Stated Maturity and bearing the
same Interest Rate as such mutilated Security, and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by each of them
to save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, having the same Issue Date and Stated Maturity and bearing the same
Interest Rate as such destroyed, lost or stolen Security, and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date, shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, except
that interest payable on the Stated Maturity of a Security shall be paid to the
Person to whom principal is paid.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest"), shall forthwith cease to be payable to the Holder on the
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relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class, postage prepaid, to each Holder at the address of
such Holder as it appears in the Securities Register not less than 10 days
prior to such Special Record Date. The Trustee may, in its discretion, in
the name and at the expense of the Company, cause a similar notice to be
published at least once in a newspaper, customarily published in the
English language on each Business Day and of general circulation in the
Borough of Manhattan, The City of New York, but such publication shall not
be a condition precedent to the establishment of such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been mailed as aforesaid, such Defaulted
Interest shall be paid to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2). Such payments shall be deemed to
cure any such Default.
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, upon such
notice as may be required by such exchange (or by the Trustee if the
Securities are not listed), if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this Clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Under the Registration Rights Agreement, upon the occurrence of the events
discussed below, additional interest shall become payable in respect of the
Securities, and corresponding additional distributions shall become payable on
the Trust Securities as follows:
a. If (X) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is filed with the Commission on or prior to
September 30, 1997 or (Y) notwithstanding that the Company and the Trust
have consummated or will consummate an Exchange Offer, the Company and the
Trust are required to file a Shelf Registration Statement and such Shelf
Registration Statement is not filed on or prior to the date required by
Section 2(b) of the Registration Rights Agreement, then commencing on the
day after the applicable required filing date, additional interest shall
accrue on the principal amount of the Securities, and additional
distributions shall accumulate on the liquidation amount of the Preferred
Securities, each at a rate of 0.25% per annum; or
b. If (X) neither the Exchange Offer Registration Statement nor
a Shelf Registration Statement is declared effective by the Commission on
or prior to the 180th day after the Issue Date or (Y) notwithstanding
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that the Company and the Trust have consummated or will an Exchange Offer,
the Company and the Trust are required to file a Shelf Registration
Statement and such Shelf Registration Statement is not declared effective
by the Commission on or prior to the 180th day after the Issue Date, then,
additional interest shall accrue on the principal amount of the Securities
and additional distributions shall accumulate on the liquidation amount of
the Preferred Securities, each at a rate of 0.25% per annum; or
c. If (X) the Trust has not exchanged Exchange Preferred Securities
for all Preferred Securities or the Company has not exchanged Exchange
Company Guarantees or Exchange Securities for all Company Guarantees or
all Securities validly tendered, in accordance with the terms of the
Exchange Offer on or prior to the 30th day after the date on which the
Exchange Offer Registration Statement was declared effective or (Y) if
applicable, the Shelf Registration Statement has been declared effective
and such Shelf Registration Statement ceases to be effective at any time
prior to the second anniversary of the Issue Date (other than after such
time as all Preferred Securities have been disposed of thereunder or
otherwise cease to be registrable securities within the meaning of the
Registration Rights Agreement), then additional interest shall accrue on
the principal amount of Securities, and additional distributions shall
accumulate on the liquidation amount of the Preferred Securities, each at
a rate of 0.25% per annum commencing on (i) the 31st day after such
effective date, in the case of (X) above, or (ii) the day such Shelf
Registration Statement ceases to be effective in the case of (Y) above;
provided, however, that neither the additional interest rate on the Securities,
nor the additional distribution rate on the liquidation amount of the Preferred
Securities, may exceed in the aggregate 0.25% per annum; provided, further,
however, that (1) upon the filing of the Exchange Offer Registration Statement
or a Shelf Registration Statement (in the case of clause a. above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause b. above), or (3) upon the
exchange of Exchange Preferred Securities, Exchange Company Guarantees and
Exchange Notes for all Preferred Securities, Company Guarantees and Securities
tendered (in the case of clause c.(X) above), or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective (in the case
of clause c.(Y) above), additional interest on the Securities, and additional
distributions on the liquidation amount of the Preferred Securities as a result
of such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue or accumulate, as the case may be.
Any amounts of additional interest and additional distributions due
pursuant to subsections a., b. or c. above will be payable in cash on the rele-
vant record dates for the payment of interest and distributions pursuant to this
Indenture and the Declaration respectively.
Section 3.8. Persons Deemed Owners.
Prior to the presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal (and premium, if any)
of and (subject to Section 3.7) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 3.9. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee, and any such Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly canceled by
the Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities shall be destroyed by the
Trustee and the Trustee shall deliver to the Company a certificate of such
destruction.
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Section 3.10. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months and, for any partial period, on the basis
of the number of days elapsed in a 360-day year of twelve 30-day months.
Interest on the Securities shall accrue from the last Interest Payment Date or,
or if no interest has been paid, from the Issue Date.
Section 3.11. Right of Set-Off.
Notwithstanding anything to the contrary in this Indenture, the
Company shall have the right to set-off any payment it is otherwise required to
make hereunder in respect of any Security to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Company Guarantee relating to such Security or under Section
5.8 of this Indenture.
Section 3.12. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by
its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States federal, state and local tax purposes it is intended that such
Security constitutes indebtedness.
Section 3.13. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE IV. SATISFACTION AND DISCHARGE
Section 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to (i)
any surviving rights of registration of transfer, substitution and exchange of
Securities, (ii) rights hereunder of Holders to receive payments of principal of
(and premium, if any) and interest on the Securities and other rights, duties
and obligations of the Holders as beneficiaries hereof with respect to the
amounts, if any, deposited with the Trustee pursuant to this Article IV and
(iii) the rights and obligations of the Trustee hereunder), and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either:
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
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(ii) will become due and payable at their Stated Maturity within one
year of the date of deposit,
and the Company, in the case of Clause (B) (i) or (B) (ii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount in the currency or currencies in which
the Securities are payable sufficient (without reinvestment) to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and premium, if
any) and interest to the date of such deposit (in the case of Securities
which have become due and payable) or to the Stated Maturity;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the Outstanding Securities will not recognize
gain or loss for United States federal income tax purposes as a result of the
application of this Section 4.1 and will be subject to United States federal
income tax, if any, on the same amount, in the same manner and at the same times
as would have been the case if such satisfaction and discharge of the Indenture
had not occurred; and
(4) the application of this Section 4.1 shall not cause the Trustee
to have a conflicting interest as defined in Section 6.8 hereof and for purposes
of the Trust Indenture Act with respect to any securities of the Company; and
(5) the funds deposited with the Trustee pursuant to Clause (1)(B)
above shall not be deemed an "investment company" as defined in the 1940 Act, or
such trust shall be qualified under the 1940 Act or exempt from regulation
thereunder; and
(6) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
in this subsection 4.1 for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article IV, the obligations of the Company to the Trustee under Section 6.7
and, if money shall have been deposited with the Trustee pursuant to subclause
(B) of Clause (1) of this Section, the obligations of the Trustee under Section
4.2 and the last paragraph of Section 10.3, shall survive.
Section 4.2. Application of Trust Money; Reinstatement.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 or money or Government
Obligations deposited with the Trustee pursuant to Section 4.3, or received by
the Trustee in respect of Government Obligations deposited with the Trustee
pursuant to Section 4.3, shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for the
payment of which such money or Government Obligations have been deposited with
or received by the Trustee; provided that such moneys need not be segregated
from other funds held in trust except to the extent required by law. Money so
held in trust shall not be subject to the provisions of Article XII.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 4.1 or 4.3 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the obligations of the Company under this Indenture, and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article IV until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 4.1 or 4.3;
provided that if the Company makes any payment of principal of (and premium, if
any) or interest on any Security following the reinstatement of its
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obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
the Paying Agent.
Section 4.3. Satisfaction, Discharge and Defeasance of Securities.
The Company shall be deemed to have paid and discharged the entire
indebtedness on all the Outstanding Securities and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of such indebtedness, when
(1) with respect to all Outstanding Securities,
(A) the Company has irrevocably deposited or caused to be irrevocably
deposited with the Trustee as trust funds in trust for such purpose an amount
sufficient to pay and discharge the entire indebtedness on all Outstanding
Securities for principal (and premium, if any) and interest to the Stated
Maturity or any Redemption Date as contemplated by the penultimate paragraph of
this Section 4.3, as the case may be; or
(B) the Company has irrevocably deposited or caused to be irrevocably
deposited with the Trustee as obligations in trust for such purpose an amount of
Government Obligations as will, in the written opinion of independent public
accountants delivered to the Trustee, together with predetermined and certain
income to accrue thereon, without consideration of any reinvestment thereof, be
sufficient to pay and discharge when due the entire indebtedness on all
Outstanding Securities for principal (and premium, if any) and interest to the
Stated Maturity or any Redemption Date as contemplated by the penultimate
paragraph of this Section 4.3, as the case may be; and
(2) the Company has paid or caused to be paid all other sums payable
with respect to the Outstanding Securities; and
(3) the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the Outstanding Securities will not recognize
gain or loss for United States federal income tax purposes as a result of the
application of this Section 4.3 and will be subject to United States federal
income tax, if any, on the same amount, in the same manner and at the same times
as would have been the case if such satisfaction, discharge and defeasance of
the Securities had not occurred; and
(4) the Company has delivered to the Trustee an Officers' Certificate
to the effect that the Securities, if then listed on any securities exchange,
will not be delisted as a result of the deposit pursuant to Clause (1) above;
and
(5) the application of this Section 4.3 shall not cause the Trustee
to have a conflicting interest as defined in Section 6.8 hereof and for purposes
of the Trust Indenture Act with respect to any securities of the Company; and
(6) at the time of the deposit pursuant to Clause (1) above: (A) no
default in the payment of all or a portion of principal of (or premium, if any)
or interest on any Senior Indebtedness of the Company shall have occurred and be
continuing, and no Event of Default with respect to any such Senior Indebtedness
shall have occurred and be continuing and shall have resulted in such Senior
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable and (B) no other Event of
Default with respect to any Senior Indebtedness of the Company shall have
occurred and be continuing permitting (after notice or the lapse of time, or
both) the holders of such Senior Indebtedness (or a representative on behalf of
the holders thereof) to declare such Senior Indebtedness due and payable prior
to the date on which it would otherwise have become due and payable, or, in the
case of either Clause (A) or Clause (B) above, each such Default or Event of
Default shall have been cured or waived or shall have ceased to exist; and
(7) no Event of Default or event which with notice or lapse of time
or both would become an Event of Default shall have occurred and be continuing
on the date of such deposit; and
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(8) the funds deposited with the Trustee pursuant to Clause (1) above
shall not be deemed an investment company as defined in the 1940 Act or such
trust shall be qualified under the 1940 Act or exempt from regulation
thereunder; and
(9) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of the entire
indebtedness on all Outstanding Securities have been complied with.
Any deposits with the Trustee referred to in Section 4.3(1) above
shall be irrevocable and shall be made under the terms of an escrow trust
agreement in form and substance reasonably satisfactory to the Trustee. If any
Outstanding Securities are to be redeemed prior to their Stated Maturity,
whether pursuant to any optional or mandatory redemption provisions, the
applicable escrow trust agreement shall provide therefor and the Company shall
make such arrangements as are satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense, of the
Company. If the Securities are not to become due and payable at their Stated
Maturity or upon call for redemption within one year of the date of deposit,
then the Company shall give, not later than the date of such deposit, notice of
such deposit to the Holders.
Upon the satisfaction of the conditions set forth in this Section 4.3
with respect to all the Outstanding Securities, the terms and conditions of the
Securities, including the terms and conditions with respect thereto set forth in
this Indenture, shall no longer be binding upon, or applicable to, the Company;
provided that the Company shall not be discharged from any payment obligations
in respect of Securities which are deemed not to be Outstanding under clause
(iii) of the definition thereof if such obligations continue to be valid
obligations of the Company under applicable law.
ARTICLE V. REMEDIES
Section 5.1. Events of Default.
"Event of Default" wherever used herein means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security, when it
becomes due and payable, and continuance of such default for a period of
30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity; or
(3) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in the performance of which or the breach
of which is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 90 days after there
has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25%
in principal amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied; or
(4) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Subsidiary (or the
payment of which is guaranteed by the Company or any Subsidiary), whether
such Indebtedness or Guarantee now exists or is incurred after the Issue
Date, if (A) such default results in the acceleration of such Indebtedness
prior to its express maturity or shall constitute a default in the payment
of such Indebtedness and
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(B) the principal amount of any such Indebtedness that has been
accelerated or not paid at maturity, when added to the aggregate principal
amount of all other such Indebtedness, at such time, that has been
accelerated or not paid at maturity, exceeds $10,000,000; or
(5) the dissolution, winding up or termination of the Trust, except
in connection with the distribution of Securities to the holders of
Preferred Securities in liquidation of the Trust and in connection with
such mergers, consolidations or amalgamations as are permitted by the
Declaration; or
(6) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under any
applicable United States federal or state bankruptcy, insolvency,
reorganization or other similar law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company
or of any substantial part of its property or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(7) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable United States federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company
or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due and its
willingness to be adjudicated a bankrupt, or the taking of corporate
action by the Company in furtherance of any such action.
A default under any other indebtedness of the Company or any of its
Subsidiaries or joint ventures or the Trust would not constitute an Event of
Default under the Securities. A deferral of payment of interest as provided in
Article XIII shall not be deemed an Event of Default.
Section 5.2. Acceleration of Maturity; Rescission and Annulment.
As provided in and subject to the provisions of this Indenture, if an
Event of Default with respect to the Securities at the time Outstanding occurs
and is continuing, then and in every such case the Trustee or the Holders of not
less than 25% in aggregate outstanding principal amount of the Outstanding
Securities may declare the principal amount of and interest on all the
Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that if the Trustee
or such Holders fail to do so, the Preferred Trustee shall have such right by a
notice in writing to the Company and the Trustee; and upon any such declaration
such specified amount of and the accrued interest on all the Securities shall
become immediately due and payable, provided that the payment of principal and
interest on such Securities shall remain subordinated to the extent provided in
Article XII.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article provided, the Holders of a
majority in aggregate principal amount of the Outstanding Securities, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum suffi-
cient to pay:
(A) all overdue installments of interest on the Securities,
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(B) the principal of (and premium, if any, on) any Securities which
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel;
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
The Holders of a majority in aggregate outstanding principal amount
of the Securities affected thereby may, on behalf of the Holders of all the
Securities, waive any past default, except a default in the payment of
principal, premium, if any, or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest, premium, if any,
and principal due otherwise than by acceleration has been deposited with the
Trustee) or a default in respect of a covenant or provision which under this
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Security and, should the Holders of such Securities fail to
annul such declaration and waive such default, the holders of a majority in
aggregate liquidation amount of the Preferred Securities shall have such right.
The Preferred Trustee, as the initial Holder of the Securities, has agreed under
the Declaration not to waive an Event of Default with respect to the Securities
without the consent of holders of a majority in aggregate liquidation amount of
the Preferred Securities then outstanding.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, a record date shall be
established for determining Holders of Outstanding Securities entitled to join
in such notice, which record date shall be at the close of business on the day
the Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided that unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.2.
Section 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if:
(1) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (and premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal (and premium, if any) and interest; and, in
addition thereto, all amounts owing the Trustee under Section 6.7.
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If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
Subject to Section 6.3 hereof, if an Event of Default occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders under this Indenture by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
Section 5.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
on the Company for the payment of overdue principal (and premium, if any) or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect to the Securities and
to file such other papers or documents as may be necessary or advisable and to
take any and all actions as are authorized under the Trust Indenture Act in
order to have the claims of the Holders and any predecessor to the Trustee under
Section 6.7 and of the Holders allowed in any such judicial proceedings; and
(ii) in particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it and any predecessor Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided that the
Trustee may, on behalf of the Holders, vote for the election of a trustee in
bankruptcy or similar official and be a member of a creditors' or other similar
committee.
Section 5.5. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of all the amounts owing the Trustee and any
predecessor Trustee under Section 6.7, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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Section 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to the Securities pursuant to this Article shall, subject to Article
XII, be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money or property on account of
principal (or premium, if any) or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any prede-
cessor Trustee under Section 6.7;
SECOND: To the extent provided in Article XII, to the holders of
Senior Indebtedness of the Company in accordance with Article XII;
THIRD: To the payment of the amounts then due and unpaid upon such
Securities for principal (and premium, if any) and interest, in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal (and premium, if any) and
interest, respectively; and
FOURTH: The balance, if any, to the Person or Persons lawfully
entitled thereto.
Section 5.7. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(2) if the Preferred Trustee is not the Holder of the Securities, the
Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
The foregoing limitations shall not apply to a suit instituted by a Holder
of a Security for enforcement of payment of the principal of and premium, it
any, or interest on such Security on or after the respective due dates expressed
in such Security.
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Section 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to Section 3.7)
interest on such Security on the respective Stated Maturities expressed in such
Security and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder. Except as set
forth in the Declaration, the holders of Preferred Securities shall have no
right to exercise directly any right or remedy available to the Holders of, or
in respect of, the Securities; provided that if the Preferred Trustee or the
Special Trustee (as defined in the Declaration) do not enforce such payment
obligations, a holder of Preferred Securities will have the right to bring an
action on behalf of the Trust to enforce the Trust's rights under the Securities
and the Indenture.
The Company and the Trustee acknowledge that pursuant to the
Declaration, the Holders of Preferred Securities are entitled, in the
circumstances and subject to the limitations set forth therein, to commence a
direct action with respect to any Event of Default under this Indenture and the
Securities.
Section 5.9. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.6, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
Except as otherwise provided in the last paragraph of Section 3.6, no
delay or omission of the Trustee or of any Holder of any Security to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders as the case may be.
Section 5.12. Control by Holders.
The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right, subject to Section 6.3 hereof, to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee, with respect to the Securities, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
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(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow such direction if the Trustee in good faith
shall, by a Responsible Officer or Officers of the Trustee, determine that
the proceeding so directed would be unjustly prejudicial to the Holders
not joining in any such direction or would involve the Trustee in personal
liability.
Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such trust
or power, a record date shall be established for determining Holders of
Outstanding Securities entitled to join in such notice, which record date shall
be at the close of business on the day the Trustee receives such notice. The
Holders on such record date, or their duly designated proxies, and only such
Persons, shall be entitled to join in such notice, whether or not such Holders
remain Holders after such record date; provided that, unless the Holders of a
majority in principal amount of the Outstanding Securities shall have joined in
such notice prior to the day which is 90 days after such record date, such
notice shall automatically and without further action by any Holder be canceled
and be of no further effect. Nothing in this paragraph shall prevent a Holder,
or a proxy of a Holder, from giving, after expiration of such 90-day period, a
new notice identical to a notice which has been canceled pursuant to the proviso
to the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.12.
Section 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate outstanding
principal amount of the Outstanding Securities affected thereby may on behalf of
the Holders of all the Securities waive any past default hereunder and its
consequences with respect to the Securities except a default:
(1) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of (or premium, if any) or interest on any Security on or after
the respective Stated Maturities expressed in such Security.
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Section 5.15. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI. THE TRUSTEE
Section 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provisions hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
Holders pursuant to Section 5.12 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture with respect
to the Securities.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
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Section 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities, the Trustee shall transmit by mail to all Holders, as their names
and addresses appear in the Securities Register, notice of such default
hereunder known to the Trustee, unless such default shall have been cured or
waived; provided that except in the case of a default in the payment of the
principal of (or premium, if any) or interest on any Security, the Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders; and provided that
in the case of any default of the character specified in Section 5.1(3), no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or passage of time or both would be, an Event of
Default.
Section 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, Security or other evidence of indebtedness, or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, Security or other evidence of indebtedness, or
other paper or document, but the Trustee in its discretion may make such
further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
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Section 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in Securities endorsed thereon,
except the Trustee's certificates of authentication, shall be taken as the
statements of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, the value or condition of
any Collateral or the priority or perfection of any security interest
purportedly granted herein. The Trustee shall not be accountable for the use or
application by the Company of the Securities or the proceeds thereof.
Section 6.5. May Hold Securities.
The Trustee, Collateral Agent, any Paying Agent, Securities Registrar
or any other agent of the Company, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Paying Agent, Securities Registrar or such other agent.
Section 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
Section 6.7. Compensation and Reimbursement.
The Company, as borrower, agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder in such amounts as the Company and the
Trustee shall agree from time to time (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the reasonable expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense (including the reasonable compensation and the
reasonable expenses and disbursements of its agents and counsel) incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this trust or the performance of its
duties hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. This indemnification shall survive the
termination of this Agreement.
To secure the Company's payment obligations in this Section, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such lien
shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 5.1(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any applicable United States Federal or State bankruptcy,
insolvency or other similar law.
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Section 6.8. Disqualification; Conflicting Interests.
The Trustee shall be subject to the provisions of Section 310(b) of
the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing
with the Commission the application referred to in the second to last paragraph
of Section 301(b) of the Trust Indenture Act.
Section 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States of America or of any State, Territory or the District of Columbia,
authorized under such laws to exercise corporate trust powers and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority, or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee pursuant to
a rule, regulation or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination applicable to United
States institutional trustees, in either case having a combined capital and
surplus of at least $50,000,000, subject to supervision or examination by
Federal or State authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then, for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article. Neither
the Company nor any Person directly or indirectly controlling, controlled by or
under common control with the Company shall serve as Trustee.
Section 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time with respect to the
Securities by Act of the Holders of a majority in principal amount of the
Outstanding Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by any
such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
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then, in any such case, (i) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee, or (ii) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may,
subject to Section 5.14, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities as their names and addresses appear in the Securities
Register. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Section 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee,
every such successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 6.12. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee,
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and in all cases the certificate of authentication shall have the full force
which it is provided anywhere in the Securities or in this Indenture that the
certificate of the Trustee shall have.
Section 6.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
or any other obligor upon the Securities, the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company or any such other obligor.
Section 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof, or any
Territory or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.6 to all Holders of Securities.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provision of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment is made pursuant to this Section, the Securities
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
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This is one of the Securities referred to in the within mentioned
Indenture.
-----------------------------------
As Trustee
By: __________________________________
As Authenticating Agent
By: ___________________________________
Authorized Officer
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ARTICLE VII. HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date,
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Securities Registrar.
Section 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights, privileges and duties of the Trustee, shall be as provided
by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company, the Trustee
and any agent of any of them shall be held accountable by reason of any
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
Section 7.3. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than May 15 in each calendar
year, commencing with the first May 15 after the first issuance of Securities
under this Indenture.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, and also with the Commission, and delivered to
the Company.
Section 7.4. Reports by Company.
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that
whether or not required by the rules and regulations of the Commission, so long
as any Securities are Outstanding, the Company shall provide the Trustee and the
Holders with (i) all annual financial information that would be required to be
contained
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in a filing with the Commission on Form 20-F as if the Company were required to
file such Forms, and (ii) quarterly financial statements as of end for the
period from the beginning of each year to the close of each quarterly period
(other than the fourth quarter), together with comparable information for the
corresponding periods of the preceding year, including, in each case, a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
from the Company's certified independent public accountants. (In addition,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of all such information and reports with the Commission
for public availability and make such information and reports available to
securities analysts and prospective investors upon request.) The Company shall
also comply with the other provisions of Trust Indenture Act Section 314(a).
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate or merge with or into any other
Person (whether or not the Company is the Surviving Person) or convey, transfer,
assign, sell, lease or otherwise dispose of, in one or more related
transactions, all or substantially all of its properties and assets as an
entirety to any Person, unless:
(1) the Surviving Person shall be a corporation, organized and
existing under the laws of the United States of America or any State thereof or
the District of Columbia;
(2) the Surviving Person (if other than the Company) shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the Company
under the Securities, the Indenture and the Security Documents;
(3) at the time of, and immediately after giving effect to, such
transaction, no Default or Event of Default, shall have occurred and be
continuing;
(4) the Surviving Person will have Consolidated Net Worth
(immediately after the transaction) equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction;
(5) at the time of such transaction and after giving pro forma effect
thereto, the Surviving Person would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to paragraph (a) of Section 10.8; and
(6) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation, merger,
conveyance, transfer, assignment, sale, lease or disposition, and any such
supplemental indenture complies with this Article and that all conditions
precedent herein provided for relating to such transaction have been complied
with and that the security interests on the Collateral pursuant to the Security
Documents are and will remain perfected; and the Trustee, subject to Section
6.1, may rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section 8.1.
Section 8.2. Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into any
other Person, or any conveyance, transfer, sale, assignment, lease or other
disposition by the Company, in one or more transactions, of substantially all of
its properties and assets as an entirety to any Person in accordance with
Section 8.1, the Surviving Person shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture with the
same effect as if such Surviving Person had been named as the Company herein,
and thereafter the Company shall be discharged from all obligations and
covenants under the Indenture and the Securities.
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Such Surviving Person may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such Surviving Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication pursuant to such
provisions and any Securities which such Surviving Person thereafter shall cause
to be signed and delivered to the Trustee on its behalf for the purpose pursuant
to such provisions. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, assignment,
transfer, conveyance, lease, or other disposition such changes in phraseology
and form may be made in the Securities thereafter to be issued as may be
appropriate.
ARTICLE IX. SUPPLEMENTAL INDENTURES
Section 9.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution of the Company, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company herein and
in the Securities; or
(2) to convey, transfer, assign, mortgage or pledge any property to
or with the Trustee or to surrender any right or power herein conferred upon the
Company; or
(3) to establish the form or terms of Securities as permitted by
Section 2.1; or
(4) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company; or
(5) to add any additional Events of Default; or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding created prior to the execution of such
supplemental indenture which is entitled to the benefit of such provision; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture, provided that such action pursuant to this clause (7) shall not
materially adversely affect the interest of the Holders or, for so long as any
of the Preferred Securities shall remain outstanding, the holders of such
Preferred Securities; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities and to add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 6.11(b); or
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(9) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust Indenture
Act.
Section 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution of the Company, and the Trustee
may modify the Indenture or enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; provided that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) extend the Stated Maturity of the principal of any Security, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof, or change the place of payment where, or the currency of payment of any
principal of, or any premium or interest on any Security, or impair the right to
institute suit for the enforcement of any such payment on or with respect to a
Security (or, in the case of redemption, on or after the date fixed for
redemption thereof); or
(2) reduce the percentage in principal amount of Securities, the
consent of whose Holders is required for any such modification or supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture; or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.17, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby; or
(4) modify the provisions in this Indenture relating to the subordi-
nation of Outstanding Securities in a manner adverse to the Holders; or
(5) modify or amend this Indenture or the Security Documents, or take
or fail to take any action, that would have the effect of impairing the Lien on
the Collateral granted pursuant to the Security Documents or permitting any
release of Collateral from such Lien except as expressly contemplated by this
Indenture or the Security Documents.
provided that so long as any of the Preferred Securities remains outstanding, no
such amendment shall be made that adversely affects the holders of such
Preferred Securities, and no termination of this Indenture shall occur, and no
waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the aggregate liquidation preference of such Preferred
Securities then outstanding unless and until the principal (and premium, if any)
of the Securities and all accrued and, subject to Section 3.7, unpaid interest
thereon have been paid in full; and provided further that, so long as any of the
Preferred Securities remain outstanding, no amendment shall be made to Section
5.8 of this Indenture without the prior consent of the holders of each Preferred
Security then outstanding unless and until the principal (and premium, if any)
of the Securities and all accrued and (subject to Section 3.7) unpaid interest
thereon have been paid in full.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
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Section 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture, and
that all conditions precedent have been complied with. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
Section 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. No such supplemental indenture shall directly or
indirectly modify the provisions of Article XII, Sections 5.3, 5.6 or the
Security Documents in any manner which might terminate or impair the rights of
the Senior Indebtedness pursuant to such subordination provisions.
Section 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Company, bear a notation in form approved by the Company as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE X. COVENANTS
Section 10.1. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each of the
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities in accordance with the terms of such
Securities and this Indenture.
Section 10.2. Maintenance of Office or Agency.
The Company will maintain in Wilmington, Delaware an office or agency
where Securities may be presented or surrendered for payment and an office or
agency where Securities may be surrendered for registration of transfer or for
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company initially appoints the
Trustee, acting through its office or agency in Wilmington, Delaware, as its
agent for said purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time the Company shall fail to maintain such office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
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The Company may also from time to time designate one or more other
offices or agencies in or outside Wilmington, Delaware, where the Securities may
be presented or surrendered for any or all of such purposes, and may from time
to time rescind such designations; provided that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
Section 10.3. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. New York City time on each due date of the principal of (and
premium, if any) or interest on any Securities, deposit with a Paying Agent a
sum sufficient to pay the principal, premium, or interest so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is the Trustee)
the Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal
(and premium, if any) or interest;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or any Paying Agent to
the Trustee, the Company or such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (and premium,
if any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall (unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Company Request to the Company,
or (if then held by the Company) shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all
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liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in a newspaper published in the English language, customarily published on
each Business Day and of general circulation in The Borough of Manhattan, The
City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
Section 10.4. Existence.
Subject to Article VIII and the other Sections of this Article X, the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect the existence, rights (charter and statutory) and
franchises of the Company; provided that the Company shall not be required to
preserve any such right or franchise if the Board of Directors of the Company in
good faith shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
Section 10.5. Maintenance of Properties.
Subject to Article VIII and the other Sections of this Article X, the
Company will cause all properties used or useful in the conduct of its business
or the business of any Subsidiary of the Company to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided
that nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, as
determined by the Company in good faith, desirable in the conduct of its
business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
Section 10.6. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (b) all material lawful claims for labor, materials and
supplies which, if unpaid, might by law become a Lien upon the property of the
Company or any of its Subsidiaries; provided that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
Section 10.7. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries to, keep at all
times all of their properties which are of an insurable nature insured against
loss or damage with insurers believed by the Company to be responsible to the
extent that property of similar character is usually so insured by corporations
similarly situated and owning like properties in accordance with good business
practice. The Company shall, and shall cause its Subsidiaries to, use the
proceeds from any such insurance policy to repair, replace or otherwise restore
the property to which such proceeds relate, except to the extent that a
different use of such proceeds is, as determined by the Company, in good faith,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
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Section 10.8. Limitation on Incurrence of Indebtedness.
(a) The Company shall not, and shall not permit any Subsidiary to,
Incur, directly or indirectly, any Indebtedness unless, on the date of such
Incurrence (and after giving effect thereto), the Consolidated Coverage Ratio
exceeds 2.5 to 1.
(b) The foregoing limitations contained in paragraph (a) do not
apply to the Incurrence of any of the following Indebtedness:
(1) Indebtedness under the Credit Agreement;
(2) Indebtedness owed to and held by a Wholly Owned Subsidiary;
provided that any subsequent issuance or transfer of any Capital Stock that
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Indebtedness (other than to
another Wholly Owned Subsidiary) shall be deemed, in each case, to constitute
the Incurrence of such Indebtedness by the Company;
(3) the Securities;
(4) Capital Lease Obligations and Indebtedness incurred, in each
case, to provide all or a portion of the purchase price or cost of construction
of an asset or, in the case of a sale/leaseback transaction, to finance the
value of such asset owned by the Company or a Subsidiary, in an aggregate
principal amount which, together with all other such Capital Lease Obligations
and Indebtedness outstanding on the date of such Incurrence (other than
Indebtedness permitted by paragraph (a) or clause (2) of this paragraph (b)),
does not exceed $3,000,000;
(5) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (3) or (4) of this paragraph
(b);
(6) Hedging Obligations permitted under the Credit Agreement as in
effect on the Issue Date;
(7) customer deposits and advance payments received from customers
for goods purchased in the ordinary course of business; and
(8) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company and its Subsidiaries outstanding on
the date of such Incurrence (other than Indebtedness permitted by paragraph (a)
or clauses (1) through (7) of this paragraph (b)), does not exceed $5,000,000.
(c) Notwithstanding the foregoing, the Company shall not, and shall
not permit any Subsidiary to, Incur, directly or indirectly, any Indebtedness
(i) that is subordinate or junior in ranking in right of payment to its Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness,
or (ii) pursuant to paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with the foregoing
covenant, (i) in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described above, the Company, in its
sole discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
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Section 10.9. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, make any Restricted Payment if at the time the Company
or such Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of Indebt-
edness pursuant to paragraph (a) of Section 10.8; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued during the period (treated as one accounting
period) from the Issue Date to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at the time
of such Restricted Payment (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds
received by the Company from the issuance or sale of its Capital Stock (other
than Disqualified Stock) subsequent to the Issue Date (other than an issuance or
sale to a Subsidiary and other than an issuance or sale to an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees); and (C) the amount by which
Indebtedness of the Company is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary), subsequent to the Issue
Date, of any Indebtedness of the Company convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company (less the amount of any
cash, or the fair value of any other property, distributed by the Company upon
such conversion or exchange).
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(1) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary
or an employee stock ownership plan or to a trust established by the Company or
any of its Subsidiaries for the benefit of their employees); provided that (A)
such purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be
excluded from the calculation of amounts under clause (3)(B) of paragraph (a)
above;
(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
Section 10.8; provided that such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded in the calculation
of the amount of Restricted Payments; or
(3) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied with
this covenant; provided that at the time of payment of such dividend, no other
Default shall have occurred and be continuing (or result therefrom); provided
further that such dividend shall be included in the calculation of the amount of
Restricted Payments.
Section 10.10. Limitation on Restrictions on Distributions from
Subsidiaries.
The Company shall not, and shall not permit any Subsidiary to,
voluntarily create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Subsidiary (a) to
pay dividends or make any other distributions on its Capital Stock to the
Company or any other Subsidiary or pay any Indebtedness owed to the Company or
any other Subsidiary, (b) to pay any management fees or billing fees to the
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Company or any other Subsidiary, (c) to make any loans or advances to the
Company or any other Subsidiary or (d) transfer any of its property or assets to
the Company or any other Subsidiary, except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Indebtedness Incurred by such
Subsidiary on or prior to the date on which such Subsidiary was acquired by the
Company (other than Indebtedness Incurred as consideration in, or to provide all
or any portion of the funds or credit support utilized to consummate the
transaction or series of related transactions pursuant to which such Subsidiary
became a Subsidiary or was acquired by the Company) and outstanding on such
date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) above or this clause (iii) or contained in any
amendment to an agreement referred to in clause (i) or (ii) above or this clause
(iii); provided that the encumbrances and restrictions with respect to such
Subsidiary contained in any such refinancing agreement or amendment are no less
favorable to the Holders than encumbrances and restrictions with respect to such
Subsidiary contained in such agreements;
(iv) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests or in
licensing agreements to the extent such provisions restrict the transfer of the
lease or the property leased thereunder or the licensing agreement or the rights
licensed thereunder;
(v) in the case of clause (d) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements or mortgages; and
(vi) any restriction with respect to a Subsidiary imposed pursuant
to an agreement entered into for the sale or disposition of all or substantially
all the Capital Stock or assets of such Subsidiary pending the closing of such
sale or disposition.
Section 10.11. Senior Subordinated Indebtedness; Liens.
The Company shall not, and shall not permit any Subsidiary to, Incur:
(1) any Indebtedness if such Indebtedness is subordinate or junior in ranking in
any respect to any Senior Indebtedness, unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness; or (2) any Secured Indebtedness that is not
Senior Indebtedness unless (A) contemporaneously therewith effective provision
is made to secure the Securities equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien or
(B) such Secured Indebtedness is permitted by clause (1), (4), (5) or (7) of
paragraph (b) of Section 10.8.
Section 10.12. Limitation on Affiliate Transactions.
(a) The Company shall not, and shall not permit any Subsidiary
to, enter into any transaction (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction"), other than reinsurance with an affiliate in the ordinary
course of business, unless the terms thereof:
(1) are no less favorable to the Company or such Subsidiary than
those that could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate;
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(2) if such Affiliate Transaction involves an amount in excess of
$1,000,000, (i) are set forth in writing and (ii) have been approved by a
majority of the members of the Board of Directors of the Company or such
Subsidiary having no personal stake in such Affiliate Transaction; and
(3) if such Affiliate Transaction involves an amount in excess of
$2,500,000, have been determined by a nationally recognized investment banking
firm to be fair from a financial standpoint to the Company and its Subsidiaries.
(b) The provisions of paragraph (a) above shall not prohibit:
(1) any Restricted Payment permitted to be paid pursuant to Section
10.9;
(2) transactions or payments pursuant to any employee arrangements or
employee or director benefit plans entered into by the Company or any of its
Subsidiaries in the ordinary course of business of the Company or such
Subsidiary; and
(3) any Affiliate Transaction between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
Section 10.13. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:
(1) the Company or such Subsidiary receives consideration at the time
of such Asset Disposition at least equal to the fair market value (including as
to the value of all non-cash consideration), as determined in good faith by the
Board of Directors of the Company or such Subsidiary as the case may be, of the
shares and assets subject to such Asset Disposition and at least 75% of the
consideration thereof received by the Company or such Subsidiary is in the form
of cash, cash equivalents or Marketable Securities; and
(2) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Subsidiary, as the case may be)
(A) first, to the extent the Company elects (or is required by the terms of any
Senior Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness
or Indebtedness (other than any Disqualified Stock) of a Wholly Owned Subsidiary
(in each case other than Indebtedness owed to the Company or an Affiliate of the
Company) within eighteen months from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (B) second, to the extent
of the balance of such Net Available Cash after application in accordance with
clause (A), to the extent the Company elects, to acquire Additional Assets
within eighteen months from the later of the date of such Asset Disposition or
the receipt of such Net Available Cash; and (C) third, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A) and (B), to make an offer to the Holders of the Securities to purchase
Securities pursuant to and subject to the conditions contained in the Indenture;
provided that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A) or (C) above, the Company or such Subsidiary
shall retire such Indebtedness and shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this
paragraph, the Company and the Subsidiaries shall not be required to apply any
Net Available Cash in accordance with this paragraph except to the extent that
the aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this paragraph exceeds $5,000,000. Pending
application of Net Available Cash pursuant to this covenant, such Net Available
Cash shall be invested in Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or cash
equivalents: (x) the assumption of Indebtedness of the Company or any Subsidiary
and the release of the Company or such Subsidiary from all liability
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on such Indebtedness in connection with such Asset Disposition and (y)
securities received by the Company or any Subsidiary from the transferee that
are promptly converted by the Company or such Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of the Securities pursuant to clause (a)(2)(C) above, the Company will be
required to purchase Securities tendered pursuant to an offer by the Company for
the Securities at a purchase price of 101% of their principal amount (without
premium) plus accrued but unpaid interest, in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. The Company shall not be required to make such an offer to purchase
Securities pursuant to this covenant if the Net Available Cash available
therefor is less than $5,000,000 (which lesser amount shall be carried forward
for purposes of determining whether such an offer is required with respect to
any subsequent Asset Disposition).
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
Section 10.14. Change of Control.
(a) Upon the occurrence of a Change of Control Triggering Event, each
holder of Preferred Securities shall have the right to require that the Trust
exchange all or any part of the Preferred Securities for Securities having an
aggregate principal amount equal to the aggregate liquidation amount of the
Securities to be exchanged. The Company shall immediately redeem any Securities
so exchanged at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase.
(b) Within 30 days following a Change of Control Triggering Event,
the Company shall mail a notice to each holder of Preferred Securities with a
copy to the Trustee stating: (1) that a Change of Control Triggering Event has
occurred and that such holder has the right to require the Trust to exchange
such holder's Preferred Securities for Securities; (2) that the Company shall
immediately redeem any Securities so exchanged at a purchase price in cash equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase; (3) the circumstances and relevant facts regarding
such Change of Control Triggering Event (including information with respect to
pro forma historical income, cash flow and capitalization after giving effect to
such Change of Control); and (4) the instructions determined by the Company,
consistent with the covenant described hereunder, that a Holder must follow in
order to have its Securities redeemed.
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this covenant, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this covenant by virtue thereof.
Section 10.15. Statement as to Compliance and Default.
(a) The Company shall deliver to the Trustee, within 95 days after
the end of each of their respective calendar years ending after the date hereof,
an Officers' Certificate covering the preceding calendar year, stating whether
or not to the best knowledge of the signers thereof the Company is in default in
the performance, observance or fulfillment of or compliance with any of the
terms, provisions, covenants and conditions of this Indenture and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
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(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within 10 days after the Company becomes aware of the occurrence of
an Event of Default or an event which, with notice or the lapse of time or both,
would constitute an Event of Default, an Officers' Certificate setting forth the
details of such Event of Default or default, and the action which the Company
proposes to take with respect thereto.
Section 10.16. Ownership of the Trust.
The Company shall continue (i) to directly or indirectly maintain
100% ownership of the Common Securities of the Trust; provided that any
permitted successor of the Company hereunder may succeed to the Company's
ownership of such Common Securities and (ii) to use its reasonable efforts to
cause the Trust (x) to remain a statutory business trust, except in connection
with the distribution of Securities to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration, and (y) to otherwise continue to be classified for United States
Federal income tax purposes as a grantor trust or another entity which is not
subject to United States federal income tax at the entity level and the assets
and income of which are treated for United States federal income tax purposes as
held and derived directly by holders of interests in the entity.
Section 10.17. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 8.1 and Sections 10.4 to 10.16, if
before or after the time for such compliance the Holders of at least a majority
in principal amount of the Outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company in respect of any
such covenant or condition shall remain in full force and effect.
Section 10.18. Payment of Expenses.
In connection with the offering, sale and issuance of the Securities
to the Trust and in connection with the sale of the Trust Securities by the
Trust, the Company, in its capacity as borrower with respect to the Securities,
shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Securities, including commissions to the initial purchasers
payable pursuant to the Purchase Agreement, fees and expenses in connection with
the Exchange Offer or other action to be taken pursuant to the Registration
Rights Agreement and compensation of the Trustee in accordance with the
provisions of Section 6.7;
(b) pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the Trust, the
offering, sale and issuance of the Trust Securities (including commissions to
the initial purchasers in connection therewith), the fees and expenses of the
Preferred Trustee and the Delaware Trustee, the costs and expenses relating to
the operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing and disposition of Trust assets;
(c) be primarily and fully liable for any indemnification obliga-
tions arising with respect to the Declaration;
(d) pay any and all taxes, duties, assessments or governmental
charges of whatever nature (other than United States withholding taxes
attributable to the Trust or its assets) imposed on the Trust by the United
States or any other taxing authority including and all liabilities, costs and
expenses with respect to such taxes of the Trust
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(collectively "Taxes and Expenses") so that the net amounts received and
retained by the Trust and the Preferred Trustee after paying such Taxes and
Expenses will be equal to the amounts the Trust and the Preferred Trustee would
have received had no such Taxes and Expenses been incurred by or imposed upon
the Trust; and
(e) pay all other fees, expenses, debts and obligations (other than
the Trust Securities) related to the Trust.
The foregoing obligations of the Company are for the benefit of, and shall be
enforceable by, any person to whom any such debts, obligations, costs, expenses
and taxes are owed (each, a "Creditor") whether or not such Creditor has
received notice thereof. Any such Creditor may enforce such obligations of the
Company directly against the Company, and the Company irrevocably waives any
right or remedy to require that any such Creditor take any action against the
Trust or any other person before proceeding against the Company. The Company
shall execute such additional agreements as may be necessary or desirable to
give full effect to the foregoing.
ARTICLE XI. REDEMPTION OF SECURITIES
Section 11.1. Applicability of This Article.
Redemption of Securities as permitted or required by any provision of
this Indenture shall be made in accordance with such provision and this Article.
Each Security shall be subject to partial redemption only in the amount of
$1,000, or integral multiples thereof.
Section 11.2. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at the
election of the Company of less than all of the Securities, the Company shall,
not less than 30 nor more than 60 days prior to the date fixed for redemption
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such date and of the principal amount of Securities to be redeemed.
In the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities, the
Company shall furnish the Trustee with an Officers' Certificate and an Opinion
of Counsel evidencing compliance with such restriction.
Section 11.3. Selection of Securities to be Redeemed.
If less than all the Securities to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of a portion of the principal
amount of any Security, provided that the unredeemed portion of the principal
amount of any Security shall be in an authorized denomination (which shall not
be less than the minimum authorized denomination) for such Security.
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.
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Section 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not later than the thirtieth day, and not earlier than the
sixtieth day, prior to the date fixed for redemption, to each Holder of
Securities to be redeemed, at the address of such Holder as it appears in the
Securities Register.
With respect to the Securities to be redeemed, each notice of
redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of partial redemption, the respective principal
amounts) of the particular Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price at which such
Securities are to be redeemed will become due and payable upon each such
Security or portion thereof, and that interest thereon, if any, shall cease to
accrue on and after said date; and
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price at which such Securities are to be redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
Section 11.5. Deposit of Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date
specified in the notice of redemption given as provided in Section 11.4, the
Company will deposit with the Trustee or with one or more Paying Agents an
amount of money sufficient to redeem on the Redemption Date all the Securities
so called for redemption at the applicable Redemption Price.
Section 11.6. Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section
11.4, the Securities or portion of Securities with respect to which such notice
has been given shall become due and payable on the date and at the place or
places stated in such notice at the applicable Redemption Price. On presentation
and surrender of such Securities at a place of payment in said notice specified,
the said Securities or the specified portions thereof shall be paid and redeemed
by the Company at the applicable Redemption Price.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security of authorized
denominations, in aggregate principal amount equal to the unredeemed portion of
the Security so presented and having the same Issue Date, Stated Maturity and
terms. If a Global Security is so surrendered, such new Security will also be a
new Global Security.
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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
Section 11.7. Company's Right of Redemption.
(a) The Company may, at its option, redeem the Securities after their
date of issuance in whole at any time or in part from time to time after August
15, 2007, subject to the provisions of this clause (a) and the other provisions
of this Article XI. The Redemption Prices (expressed as a percentage of
principal amount) for any Security so redeemed pursuant to this clause (a) shall
be as set forth below plus any accrued and unpaid interest to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date) if redeemed during the twelve month period beginning on
August 15 of the years indicated below:
Percentage of
Principal
Year Amount
- ---- -------
2007............................................................. 104.750%
2008............................................................. 103.167%
2009............................................................. 101.583%
2010 and thereafter.............................................. 100.000%
(b) If a Tax Event or an Investment Company Event in respect of the
Trust shall occur and be continuing, the Company shall cause the trustees of the
Trust to dissolve and liquidate the Trust and, after satisfaction of liabilities
to creditors of the Trust cause Securities to be distributed to the holders of
the Trust Securities in liquidation of the Trust or, in the event of a Tax Event
only, may cause the Securities to be redeemed, in each case, subject to and in
accordance with the provisions of the Declaration and subject to Article XI of
the Indenture, within 90 days following the occurrence of such Tax Event or
Investment Company Event. Any redemption of the Securities as a result of a Tax
Event shall be in whole at 100% of the principal amount thereof, plus accrued
and unpaid interest, to the Redemption Date.
ARTICLE XII. SUBORDINATION OF SECURITIES
Section 12.1. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to Article IV), the
payment of the principal of (including any payments on redemption or
repurchase), premium, if any and interest on each and all of the Securities are
hereby expressly made subordinate and subject in right of payment to the prior
payment in full of all amounts then due and payable in respect of all Senior
Indebtedness of the Company whether outstanding on the date the securities are
originally issued or thereafter incurred.
Section 12.2. Payment Over of Proceeds Upon Dissolution, Etc.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or its property (each such event, if
any, herein sometimes referred to as a "Proceeding"), the holders of Senior
Indebtedness of the Company shall be entitled to receive payment in full of
principal of (and premium, if any) and interest, if any, on such Senior
Indebtedness, or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner
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satisfactory to the holders of Senior Indebtedness, before the Holders of the
Securities are entitled to receive or retain any payment or distribution of any
kind or character, whether in cash, property or securities (including any
payment or distribution which may be payable or deliverable by reason of the
payment of any other Indebtedness of the Company (including the Securities)
subordinated to the payment of the Securities, such payment or distribution
being hereinafter referred to as a "Senior Subordinated Payment"), on account of
principal of (or premium, if any) or interest on the Securities or on account of
the purchase or other acquisition of Securities by the Company or any
Subsidiary, and to that end the holders of Senior Indebtedness shall be entitled
to receive, for application to the payment thereof, any payment or distribution
of any kind or character, whether in cash, property or securities, including any
Senior Subordinated Payment, which may be payable or deliverable in respect of
the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Senior Subordinated
Payment, before all Senior Indebtedness is paid in full or payment thereof is
provided for in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Indebtedness, and if such fact shall, at or prior to
the time of such payment or distribution, have been made known to the Trustee
or, as the case may be, such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior Indebtedness to substantially
the same extent as the Securities are so subordinated as provided in this
Article. The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the sale of all or substantially all of its properties and assets as an entirety
to another Person or the liquidation or dissolution of the Company following the
sale of all or substantially all of its properties and assets as an entirety to
another Person upon the terms and conditions set forth in Article VIII shall not
be deemed a Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale such properties and assets as an entirety, as the case may be,
shall, as a part of such consolidation, merger, or sale comply with the
conditions set forth in Article VIII.
Section 12.3. Prior Payment to Senior Indebtedness Upon Acceleration
of Securities.
In the event that, upon the occurrence of an Event of Default, any
Securities are declared due and payable before their Stated Maturity, then (a)
the Company or the Trustee, at the direction of the Company, shall promptly
notify the holders of Senior Indebtedness of the Company or the representative
of such holders of the acceleration, and (b) in such event, if any Senior
Indebtedness is outstanding, the Company may not pay the Securities until five
Business Days after the representative of all issues of Senior Indebtedness
receive notice of such acceleration and, thereafter, may pay the Securities only
if payment is otherwise permitted hereunder at that time.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 12.2 would be applicable.
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Section 12.4. No Payment When Specified Senior Indebtedness in
Default.
(a) The Company may not pay principal of, or premium (if any) or
interest on, the Securities, and may not repurchase, redeem or otherwise retire
any Securities (collectively "pay the Notes") if (i) any Specified Senior
Indebtedness of the Company is not paid when due or (ii) any other default on
Specified Senior Indebtedness of the Company occurs and the maturity of such
Specified Senior Indebtedness is accelerated in accordance with its terms,
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Specified Senior Indebtedness has been
paid in full. However, the Company may pay the Securities without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from a representative of the Specified Senior Indebtedness with respect
to which either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing.
(b) During the continuance of any default (other than a default
described in clause (i) or (ii) of the preceding paragraph (a)) with respect to
any Specified Senior Indebtedness of the Company pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the Notes to the Holders for a
period (a "Payment Blockage Period") commencing upon the receipt by the Trustee
(with a copy to the Company) of written notice (a "Blockage Notice") of such
default from the representative of the holders of such Specified Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the
representative of the holders of such Specified Senior Indebtedness, (ii)
because the default giving rise to such Blockage Notice is no longer continuing,
as certified to the Trustee by the representative of the holders of such
Specified Senior Indebtedness, or (iii) because such Specified Senior
Indebtedness has been repaid in full, as certified to the Trustee by the
representative of the holders of such Specified Senior Indebtedness).
(c) Notwithstanding the preceding paragraph (b), unless the holders
of such Specified Senior Indebtedness or the representative of such holders have
accelerated the maturity of such Specified Senior Indebtedness, the Company may
resume payments on the Securities after the end of such Payment Blockage Period.
The Securities shall not be subject to more than one Payment Blockage Period in
any consecutive 360-day period, irrespective of the number of defaults with
respect to Specified Senior Indebtedness during such period.
(d) In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 12.2 would be applicable.
Section 12.5. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or
in any of the Securities shall prevent (a) the Company, at any time except
during the pendency of any Proceeding referred to in Section 12.2 or under the
conditions described in Sections 12.3 and 12.4, from making payments at any time
of principal of (and premium, if any) or interest on the Securities, or (b) the
application by the Trustee of any money or Government Obligations deposited with
it hereunder in accordance with the provisions of Section 4.3 to the payment of
or on account of the principal of (and premium, if any) or interest on the
Securities or the retention of such payment by the Holders, if, at the time of
such payment or application, as the case may be, by the Company or the Trustee,
as the case may be, the Company or the Trustee, as the case may be, did not have
knowledge that such payment would have been prohibited by the provisions of this
Article.
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Section 12.6. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness of the
Company, or the provision for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Indebtedness of the
Company, the Holders of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article (equally and ratably with the holders
of all indebtedness of the Company which by its express terms is subordinated to
Senior Indebtedness of the Company to substantially the same extent as the
Securities are subordinated to the Senior Indebtedness and is entitled to like
rights of subrogation by reason of any payments or distributions made to holders
of such Senior Indebtedness) to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness of the Company until the
principal of (and premium, if any) and interest on the Securities shall be paid
in full. For purposes of such subrogation or assignment, no payments or
distributions to the holders of the Senior Indebtedness of the Company of any
cash, property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article, and no
payments pursuant to the provisions of this Article to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
Section 12.7. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as between the Company and the Holders of the
Securities, the obligations of the Company, which are absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Securities and
creditors of the Company other than their rights in relation to the holders of
Senior Indebtedness of the Company; or (c) prevent the Trustee or the Holder of
any Security from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture including, without limitation, filing and
voting claims in any Proceeding, subject to the rights, if any, under this
Article of the holders of Senior Indebtedness to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder and
subject to the terms of the Intercreditor Agreement.
Section 12.8. Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination provided
in this Article and appoints the Trustee his or her attorney-in-fact for any and
all such purposes.
Section 12.9. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with.
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Section 12.10. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a holder of Senior Indebtedness or from any
trustee, agent or representative therefor (whether or not the facts contained in
such notice are true); provided that if the Trustee shall not have received the
notice provided for in this Section at least two Business Days prior to the date
upon which by the terms hereof any monies may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium, if
any) or interest on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date.
Section 12.11. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Article VI, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
Section 12.12. Trustee Not Fiduciary for Holders of Senior
Indebtedness.
The Trustee, in its capacity as trustee under this Indenture, shall
not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of
the Company and shall not be liable to any such holders if it shall in good
faith mistakenly pay over or distribute to Holders of Securities or to the
Company or to any other Person cash, property or securities to which any holders
of Senior Indebtedness of the Company shall be entitled by virtue of this
Article or otherwise.
Section 12.13. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness of the
Company which may at any time be held by it, to the same extent as any other
holder of Senior Indebtedness of the Company, and nothing in this Indenture
shall deprive the Trustee of any of its rights as such holder.
Section 12.14. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee.
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Section 12.15. Certain Conversions or Exchanges Deemed Payment.
For the purposes of this Article only, (a) the issuance and delivery
of junior securities upon conversion or exchange of Securities shall not be
deemed to constitute a payment or distribution on account of the principal of
(or premium, if any) or interest on Securities or on account of the purchase or
other acquisition of Securities, and (b) the payment, issuance or delivery of
cash, property or securities (other than junior securities) upon conversion or
exchange of a Security shall be deemed to constitute payment on account of the
principal of such security. For the purposes of this Section, the term "junior
securities" means (i) shares of any stock of any class of the Company and (ii)
securities of the Company which are subordinated in right of payment to all
Senior Indebtedness of the Company which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Securities are so subordinated as provided in this
Article.
ARTICLE XIII. EXTENSION OF INTEREST PAYMENT PERIOD
Section 13.1. Extension of Interest Payment Period.
(a) Unless as Event of Default has occurred and is continuing, the
Company shall have the right, at any time during the term of the Securities, to
defer the payment of interest at any time or from time to time for a period not
exceeding 10 consecutive semi-annual periods, including the first such
semi-annual period during such extension period (the "Extension Period"), during
which Extension Period no interest shall be due and payable; provided that no
Extension Period may extend beyond the Stated Maturity. To the extent permitted
by applicable law, interest, the payment of which has been deferred because of
the extension of the interest payment period pursuant to this Section 13.1, will
bear interest thereon at 9 1/2% compounded semi-annually for each semi-annual
period of the Extension Period ("Compounded Interest"). At the end of the
Extension Period, the Company shall pay all interest accrued and unpaid on the
Securities, including any Compounded Interest that shall be payable to the
holders of the Securities in whose names the Securities are registered in the
Security Register on the first record date after the end of the Extension
Period. Such deferment of payments of interest shall not be deemed an Event of
Default.
(b) During any such Extension Period, the Company shall not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's Capital
Stock, (ii) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company that rank pari
passu with or junior in right of payment to the Securities or (iii) make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any Subsidiary if such guarantee ranks pari passu with or junior
in right of payment to the Securities (other than (a) dividends or distributions
in shares of or options, warrants or rights to subscribe for or purchase Capital
Stock of the Company, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Company Guarantee, (d) as a result of a
reclassification of the Company's Capital Stock or the exchange or conversion of
one class or series of the Company's Capital Stock for another class or series
of the Company's Capital Stock, (e) the purchase of fractional interests in
shares of the Company's Capital Stock pursuant to the conversion or exchange
provisions of such Capital Stock or the security being converted or exchanged,
and (f) purchases or issuances of Capital Stock under any of the Company's stock
option, stock purchase, stock loan or other benefit plans for its directors,
officers or employees or any of the Company's dividend reinvestment plans, in
each case as now existing or hereafter established or amended).
(c) Before the termination of any Extension Period, the Company may
defer payments of interest by further extending such period, provided that such
period, together with all such previous and further extensions within such
Extension Period, shall not exceed 10 consecutive semi-annual periods, including
the first such semi-annual period during such Extension Period, or extend beyond
the Maturity Date of the Securities. Upon the termination of any Extension
Period and the payment of all Compounded Interest then due, the Company may
elect to commence
-69-
<PAGE>
a new Extension Period, subject to the foregoing requirements. No interest shall
be due and payable during an Extension Period, except at the end thereof, but
the Company may prepay at any time all or any portion of the interest accrued
during an Extension Period.
Section 13.2. Notice of Extension.
(a) The Company must give the Trustee and the Preferred Trustee
notice of its election of any Extension Period (or an extension thereof) at
least five Business Days prior to the earlier of (i) the Interest Payment Date
or (ii) the date the Trustee is required to give notice to any securities
exchange or to holders of Trust Securities of the record date or the date such
distributions on the Trust Securities are payable, but in any event not less
than five Business Days prior to such record date. The Trustee shall give notice
of the Company's election to begin or extend a new Extension Period to the
Holders of the Trust Securities.
(b) The semi-annual period in which any notice is given pursuant to
paragraph (a) of this Section 13.2 shall be counted as one of the ten
semi-annual periods permitted in the maximum Extension Period permitted under
Section 13.1. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
[rest of page intentionally left blank]
-70-
<PAGE>
Wilmington Trust Company hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
-71-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
SYMONS INTERNATIONAL GROUP, INC.,
As Issuer
By:_/s/ Alan G. Symons_______________
Name: Alan G. Symons
Title: Chief Executive Officer
By:_/s/ Gary P. Hutchcraft___________
Name: Gary P. Hutchcraft
Title: Vice President
WILMINGTON TRUST COMPANY,
As Trustee
By:_Emmett R. Harmon_________________
Name: Emmett R. Harmon
Title: Vice President
-72-
<PAGE>
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On the day of August, 1997, before me personally came
_________________________________, to me known, who, being by me duly sworn, did
depose and say that [he -- she] is ___________________________ of Symons
International Group, Inc.
------------------------------
-73-
<PAGE>
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On the day of August, 1997, before me personally came
________________________________, to me known, who, being by me duly sworn, did
depose and say that [he -- she] is _________________________ of [Bank], one of
the corporations described in and which executed the foregoing instrument; that
[he -- she] knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that [he -- she] signed [his -- her]
name thereto by like authority.
______________________________n
-74-
Exhibit 4.2
Form of Certificate of Exchange Notes
Form of Certificate of Exchange Notes (in substantially the form of Section
2.2 to Exhibit 4.1)
Exhibit 4.3
DECLARATION OF TRUST
OF SIG CAPITAL TRUST I
This Declaration of Trust, dated as of August 4, 1997 (this
"Declaration of Trust"), among Symons International Group, Inc. as sponsor (the
"Sponsor"), Wilmington Trust Company, a Delaware banking corporation, as
trustee, and Alan G. Symons, as trustee (jointly, the "Trustees").
The Sponsor and the Trustees hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as "SIG
Capital Trust I" in which name the Trustees, or the Sponsor to
the extent provided herein, may engage in the transactions
contemplated hereby, make and execute contracts, and sue and be
sued.
2. The Sponsor hereby assigns, transfers conveys and sets over to
the Trust the sum of $10. The Trustees hereby acknowledge receipt
of such amount in trust from the Sponsor, which amount shall
constitute the initial trust estate. It is the intention of the
parties hereto that the Trust created hereby constitute a
business trust under Chapter 38 of Title 12 of the Delaware Code,
12 Del.C.ss.3801, et seq. (the "Business Trust Act"), and that
this document constitutes the governing intrument of the Trust.
The Trustees are hereby authorized and directed to execute and
file a certifi- cate of trust with the Delaware Secretary of
State in accor- dance with the provisions of the Business Trust
Act.
3. The Sponsor and the Trustees will enter into an amended and
restated Declaration of Trust, satisfactory to each such party,
to provide for the contemplated operation of the Trust created
hereby and the issuance of the Capital Securities and Common
Securities referred to therein. Prior to the execution and
delivery of such amended and restated Declaration of Trust, the
Trustees shall not have any duty or obligation hereunder or with
respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain prior to such
execution and delivery of any licenses, consents or approvals
required by applicable law or otherwise.
4. The Sponsor and the Trustees hereby authorize and direct the
Sponsor, as the sponsor of the Trust, (i) to prepare one or more
offering memoranda in preliminary and final form relating to the
offering and sale of Capital Securities of the Trust in a
transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and such
other forms or filings as may be required by the 1993 Act, the
Securities Exchange Act of 1934, as amended, or the Trust
Indenture Act of 1939, as amended, in each case relating to the
Capital Securities of the Trust; (ii) to file and execute on
behalf of the Trust, such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of
process and other papers and documents that shall be necessary or
desirable to register or establish the exemption from
registration of the Capital Securities of the Trust under
1
<PAGE>
the securities or "Blue Sky" laws of such jurisdictions as the
Sponsor, on behalf of the Trust, may deem necessary or desirable;
(iii) to execute and file an application, and all other
applications, statements, certificates, agreements and other
instruments that shall be necessary or desirable, to the Private
Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market and, if and at such time as determined by the
Sponsor, to the New York Stock Exchange or any other national
stock exchange or the Nasdaq National Market for listing or
quotation of the Capital Securities of the Trust; (iv) to execute
and deliver letters or documents to, or instruments for filing
with, a depository relating to the Capital Securities of the
Trust; and (v) to execute, deliver and perform on behalf of the
Trust one or more purchase agreements, dealer manager agreements,
escrow agreements and other related agreement providing for or
relating to the sale of the Capital Securities of the Trust.
5. This Declaration of Trust may be executed in one or more
counterparts.
6. The number of Trustees initially shall be two (2) and thereafter
the number of Trustees shall be such number as shall be fixed
from time to time by a written instrument signed by the Sponsor
which may increase or decrease the number of Trustees; provided,
however, that to the extent required by the Business Trust Act,
one Trustee shall either be a natural person who is a resident of
the State of Delaware, or if not a natural person, an entity
which has its principal place of business in the State of
Delaware and otherwise meets the requirements of applicable
Delaware law. Subject to the foregoing, the Sponsor is entitled
to appoint or remove without cause any Trustee at any time. The
Trustees may resign upon thirty (30) days' prior notice to the
Sponsor.
7. This Declaration of Trust shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without
regard to conflict of laws of principles).
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
SYMONS INTERNATIONAL GROUP, INC.,
as Sponsor
By:_______________________________
Name:
Title:
2
<PAGE>
WILMINGTON TRUST COMPANY,
as trustee and not in its individual capacity
By: /s/ Emmett R. Harmon
Name: Emmett R. Harmon
Title: Vice President
______________________________________
ALAN G. SYMONS, as trustee and not in his
individual capacity
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
SYMONS INTERNATIONAL GROUP, INC.,
as Sponsor
By:_______________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as trustee and not in its individual capacity
By:_______________________________
Name:
Title:
/s/ Alan G. Symons
ALAN G. SYMONS, as trustee and not in his
individual capacity
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
SYMONS INTERNATIONAL GROUP, INC.,
as Sponsor
By: /s/ Alan G. Symons
Name: ALAN G. SYMONS
Title: CHIEF EXECUTIVE OFFICER
WILMINGTON TRUST COMPANY,
as trustee and not in its individual capacity
By:_______________________________
Name:
Title:
/s/ Alan G. Symons
ALAN G. SYMONS, as trustee and not in his
individual capacity
3
Exhibit 4.4
AMENDED AND RESTATED
DECLARATION OF TRUST
SIG CAPITAL TRUST I
Dated as of August 12, 1997
1
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Defined Terms.......... 1
Section 1.1. Definitions.................................................. 1
ARTICLE II
ESTABLISHMENT OF THE TRUST........... 10
Section 2.1. Name......................................................... 10
Section 2.2. Office of the Delaware Trustee; Principal Place of Business.. 10
Section 2.3. Initial Contribution of Trust Property; Organizational
Expenses..................................................... 11
Section 2.4. Issuance of the Preferred Securities......................... 11
Section 2.5. Issuance of the Common Securities; Subscription and Purchase
of the Notes................................................. 11
Section 2.6. Purposes and Functions of the Trust.......................... 11
Section 2.7. Authorization to Enter into Certain Transactions............. 12
Section 2.8. Assets of Trust.............................................. 15
Section 2.9. Title to Trust Property...................................... 15
ARTICLE III
PAYMENT ACCOUNT......... 15
Section 3.1. Payment Account....................................... 15
ARTICLE IV
DISTRIBUTIONS; REDEMPTION.... 16
Section 4.1. Distributions......................................... 16
Section 4.2. Redemption............................................ 17
Section 4.3. Subordination of Common Securities.................... 19
Section 4.4. Payment Procedures.................................... 19
Section 4.5. Tax Returns and Reports............................... 19
Section 4.6. Payment of Taxes, Duties, Etc. of Trust............... 19
Section 4.7. Payments under Indenture.............................. 20
i
<PAGE>
ARTICLE V
TRUST SECURITIES CERTIFICATES.. 20
Section 5.1. Initial Ownership..................................... 20
Section 5.2. General Provisions Regarding Trust Securities......... 20
Section 5.3. Execution and Authentication.......................... 20
Section 5.4. Form and Dating....................................... 21
Section 5.5. Transfer of Trust Securities.......................... 23
Section 5.6. Transfer Procedures and Restrictions.................. 23
Section 5.7. Temporary Securities.................................. 30
Section 5.8. Securities Register and Securities Registrar.......... 30
Section 5.9. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.......................................... 31
Section 5.10. Persons Deemed Securityholders........................ 31
Section 5.11. Access to List of Securityholders' Names and
Addresses............................................. 31
Section 5.12. Maintenance of Office or Agency....................... 31
Section 5.13. Appointment of Paying Agent........................... 32
Section 5.14. Ownership of Common Securities by Sponsor............. 32
Section 5.15. Rights of Securityholders............................. 33
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING... 35
Section 6.1. Limitations on Voting Rights.......................... 35
Section 6.2. Notice of Meetings.................................... 37
Section 6.3. Meetings of Preferred Securities Securityholders...... 38
Section 6.4. Voting Rights......................................... 38
Section 6.5. Proxies, etc.......................................... 38
Section 6.6. Securityholder Action by Written Consent.............. 39
Section 6.7. Record Date for Voting and Other Purposes............. 39
Section 6.8. Acts of Securityholders............................... 39
Section 6.9. Inspection of Records................................. 40
ARTICLE VII
REPRESENTATIONS AND WARRANTIES......... 40
Section 7.1. Representations and Warranties of the Bank, the
Preferred Trustee and the Delaware Trustee............ 40
Section 7.2. Representations and Warranties of Sponsor............. 42
ii
<PAGE>
ARTICLE VIII
THE TRUSTEES................... 42
Section 8.1. Certain Duties and Responsibilities................... 42
Section 8.2. Certain Notices....................................... 43
Section 8.3. Certain Rights of Preferred Trustee................... 44
Section 8.4. Not Responsible for Recitals or Issuance of
Securities............................................ 46
Section 8.5. May Hold Securities................................... 46
Section 8.6. Compensation; Indemnity; Fees......................... 46
Section 8.7. Corporate Preferred Trustee Required; Eligibility of
Trustees.............................................. 47
Section 8.8. Conflicting Interests................................. 48
Section 8.9. Co-Trustees and Separate Trustee...................... 48
Section 8.10. Resignation and Removal; Appointment of Successor..... 49
Section 8.11. Acceptance of Appointment by Successor................ 50
Section 8.12. Merger, Conversion, Consolidation or Succession to
Business.............................................. 51
Section 8.13. Preferential Collection of Claims Against Sponsor or
Trust................................................. 51
Section 8.14. Reports by Preferred Trustee.......................... 52
Section 8.15. Reports to the Preferred Trustee...................... 53
Section 8.16. Evidence of Compliance with Conditions Precedent...... 53
Section 8.17. Number of Trustees.................................... 53
Section 8.18. Delegation of Power................................... 53
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER......... 54
Section 9.1. Dissolution Upon Expiration Date...................... 54
Section 9.2. Early Dissolution..................................... 54
Section 9.3. Termination........................................... 55
Section 9.4. Liquidation........................................... 55
Section 9.5. Mergers, Consolidations, Amalgamations or Replacements
of the Trust.......................................... 57
iii
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS..... 58
Section 10.1. Limitation of Rights of Securityholders............... 58
Section 10.2. Amendment............................................. 58
Section 10.3. Separability.......................................... 60
Section 10.4. Governing Law......................................... 60
Section 10.5. Payments Due on Non-Business Day...................... 60
Section 10.6. Successors............................................ 60
Section 10.7. Headings.............................................. 61
Section 10.8. Reports, Notices and Demands.......................... 61
Section 10.9. Agreement Not to Petition............................. 61
Section 10.10. Trust Indenture Act; Conflict with Trust Indenture
Act................................................... 62
Section 10.11. Acceptance of Terms of Declaration, Company Guarantee
and Indenture......................................... 63
Exhibit A - Certificate of Trust of SIG Capital Trust I Exhibit B - Certificate
of Depository Agreement
Exhibit C - Certificate Evidencing Common Securities of SIG Capital Trust I
Exhibit D - Certificate Evidencing Preferred Securities of SIG Capital Trust I;
Form of Assignment
iv
<PAGE>
SIG CAPITAL TRUST I
Certain Sections of this Amended and Restated Declaration of Trust
Relating to Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Trust Agreement
Act Section Section
- --------------- ---------------
(ss.)310 (a)(1)............................................8.7
(a)(2)............................................8.7
(a)(3)............................................8.9
(a)(4)............................................2.7(a)(ii)
(b)...............................................8.8
(ss.)311 (a)...............................................8.13
(b)...............................................8.13
(ss.)312 (a)...............................................5.7
(b)...............................................5.7
(c)...............................................5.7
(ss.)313 (a)...............................................8.14(a)
(a)(4)............................................8.14(b)
(b)...............................................8.14(b)
(c)...............................................10.8
(d)...............................................8.14(c)
(ss.)314 (a)...............................................8.15
(b)...............................................Not Applicable
(c)(1)............................................8.16
(c)(2)............................................8.16
(c)(3)............................................Not Applicable
(d)...............................................Not Applicable
(e)...............................................1.1, 8.16
(ss.)315 (a)...............................................8.1(a), 8.3(a)
(b)...............................................8.2, 10.8
(c)...............................................8.1(a)
(d)...............................................8.1, 8.3
(e)...............................................Not Applicable
(ss.)316 (a)...............................................Not Applicable
(a)(1)(A).........................................Not Applicable
(a)(1)(B).........................................Not Applicable
(a)(2)............................................Not Applicable
(b)...............................................5.14
(c)...............................................6.7
(ss.)317 (a)(1)............................................Not Applicable
(a)(2)............................................Not Applicable
(b)...............................................5.9
(ss.)318 (a)...............................................10.10
- -------------
Note: This reconciliation and tie sheet shall not, for any purpose, be
deemed to be a part of the Amended and Restated Declaration of Trust.
i
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
OF
SIG CAPITAL TRUST I
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of August 12, 1997, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial ownership interests in the assets of the Trust to be issued pursuant
to this Declaration;
WHEREAS, the Trustees and the Sponsor wish to continue SIG Capital
Trust I (the "Trust"), a business trust created under the Delaware Business
Trust Act pursuant to the original Declaration of Trust of the Trust, dated as
of August 4, 1997 (the "Original Declaration"), and a Certificate of Trust of
the Trust, which was filed with the Secretary of State of the State of Delaware
on August 4, 1997;
WHEREAS, the purposes of the Trust shall be to provide for, among other
things, (i) the issuance of the Common Securities by the Trust to the Sponsor,
(ii) the issuance of sale of the Preferred Securities by the Trust pursuant to
the Purchase Agreement, (iii) the acquisition by the Trust from the Sponsor of
all of the right, title and interest in the Notes and (iv) the appointment of
the Trustees;
WHEREAS, all of the parties hereto, by this Declaration, amend and
restate each and every term and provision of the Original Declaration;
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Delaware Business Trust Act and
that this Declaration constitute the governing instrument of such business
trust, the Trustees declare that all assets contributed to the Trust will be
held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial ownership interests in the assets
of the Trust issued hereunder, subject to the provisions of this Declaration.
ARTICLE I
Defined Terms
Section 1.1. Definitions.
For all purposes of this Declaration, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the
Trust Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
1
<PAGE>
(c) unless the context otherwise requires, any reference
to an "Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Declaration; and
(d) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Declaration as a whole and not
to any particular Article, Section or other subdivision.
"Accredited Investor Global Preferred Security" has the
meaning set forth in Section 5.6(b).
"Act" has the meaning specified in Section 6.8.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, provided, however, that an Affiliate
of the Sponsor shall not be deemed to include the Trust. For the purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Bank" means the Preferred Trustee in its separate corporate
capacity and not in its capacity as Preferred Trustee.
"Bankruptcy Event" means, with respect to any Person, under
the relevant jurisdiction:
(a) the entry of a decree or order by a court having
jurisdiction in the premises judging such Person a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjudication or composition of or in respect of such Person under any applicable
U.S. federal or state bankruptcy, insolvency, reorganization or other similar
law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of such Person or of any substantial part of its
property or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; or
(b) the institution by such Person of proceedings to be
adjudicated bankrupt or insolvent, or the consent by it to the institution or
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable U.S. federal or state bankruptcy, insolvency, reorganization or other
similar law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of such Person or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the admission
by it in writing of its inability to pay its debts generally as they become due
and its willingness to be adjudicated a bankrupt, or the taking of corporate
action by such Person in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.9.
2
<PAGE>
"Board Resolution" means a copy of a resolution certified by
the Secretary, or an Assistant Secretary of the Sponsor to have been duly
adopted by the Sponsor's Board of Directors or such committee of the Board of
Directors or officers of the Sponsor to which authority to act on behalf of the
Board of Directors has been delegated, and to be in full force and effect on the
date of such certification and delivered to the Trustees.
"Book-Entry Preferred Securities Certificates" means a
beneficial interest in the Preferred Securities Certificates, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 5.4(b).
"Business Day" means any day other than a day on which banking
institutions in The City of New York or Wilmington, Delaware, are authorized or
required by law to close.
"Certificate Depository Agreement" means the agreement among
the Trust, the Sponsor and DTC, as the initial Clearing Agency, dated as of the
Closing Date, relating to the Trust Securities Certificates, substantially in
the form attached as Exhibit B, as the same may be amended and supplemented from
time to time.
"Change of Control Triggering Event" means the occurrence of a
Change of Control Event (as defined in the Indenture).
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act. DTC will be the
Initial Clearing Agent.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Date" has the meaning specified in the Purchase
Agreement, which data is also the date of execution and delivery of this
Declaration.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Securities" has the meaning specified in Section 5.2.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Common Securities Company Guarantee" means the guarantee
agreement dated as of August 12, 1997 of the Sponsor in respect of the Common
Securities.
3
<PAGE>
"Company Guarantees" means the Common Securities Company
Guarantee and the Preferred Securities Company Guarantee.
"Company Trustee" means each of Alan G. Symons, Douglas H.
Symons and Gary P. Hutchcraft, solely in such Person's capacity as Company
Trustee of the Trust and not in such Person's individual capacity, or such
Company Trustee's successor in interest in such capacity, or any successor
trustee appointed as herein provided.
"Corporate Trust Office" means the principal office of the
Preferred Trustee located at 1100 North Market Street, Rodney Square North,
Wilmington, Delaware.
"Declaration" means this Amended and Restated Declaration, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Declaration and any such modification, amendment or supplement
the provisions of the Trust Indenture Act that are deemed to be a part of and
govern this Declaration and any such modification, amendment or supplement,
respectively.
"Declaration Event of Default" means a Note Event of Default
or a default by the Sponsor under the Guarantee Agreement.
"Definitive Preferred Securities" shall have the meaning set
forth in Section 5.4(c).
"Delaware Business Trust Act" means Chapter 38 of Title 12 of
the Delaware Code 12 Del. C. ss.3801, et seq., as it may be amended from time to
time.
"Delaware Trustee" means Wilmington Trust Company, a Delaware
banking corporation, solely in its capacity as Delaware Trustee of the Trust and
not in its individual capacity, or its successor in interest in such capacity,
or any successor trustee appointed as herein provided.
"Distribution Date" has the meaning specified in Section
4.1(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.
"DTC" means The Depository Trust Company, which is the initial
Clearing Agency.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the exchange offer (including any
private exchange offer) contemplated by Section 2(a) of the Registration Rights
Agreement.
"Expiration Date" has the meaning specified in Section 9.1.
4
<PAGE>
"Global Preferred Security" means the Restricted Global
Preferred Securities, the Regulation S Global Preferred Securities, the
Accredited Investor Global Preferred Securities and the Unrestricted Global
Preferred Securities.
"Holder" has the meaning specified under the definition of
"Securityholder."
"Indenture" means the Senior Subordinated Indenture, dated as
of August 12, 1997, among the Sponsor and the Indenture Trustee, as trustee, as
amended or supplemented from time to time.
"Indenture Trustee" means Wilmington Trust Company, a Delaware
banking corporation, and any successor thereto.
"Investment Company Event" means the receipt by the Sponsor of
an Opinion of Counsel, rendered by a law firm having an independent tax and
securities practice experienced in such matters, to the effect that, as a result
of the occurrence of a change in law or regulation or a change in interpretation
or application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or
will be considered an investment company which is required to be registered
under the 1940 Act, which Change in 1940 Act Law becomes effective on or after
the date of original issuance of the Preferred Securities under this
Declaration.
"Lien" means any lien, pledge, charge, encumbrance, mortgage,
deed of trust, adverse ownership interest, hypothecation, assignment, security
interest or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Notes to be contemporaneously redeemed in accordance with the
Indenture the proceeds of which will be used to pay the Redemption Price of such
Trust Securities, and (b) with respect to a distribution of Notes to Holders of
Trust Securities in connection with a dissolution or liquidation of the Trust
Securities of the Holder to whom such Notes are distributed.
"Liquidation Amount" means the stated amount of $1,000.00 per
Trust Security.
"Liquidation Date" means the date on which Notes are to be
distributed to Holders of Trust Securities in connection with a dissolution and
liquidation of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in
Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as
amended.
"Note Event of Default" means an "Event of Default" as defined
in the Indenture.
"Note Redemption Date" means, with respect to any Notes to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
5
<PAGE>
"Note Tax Event" means a "Tax Event" as defined in the
Indenture.
"Notes" means the aggregate principal amount of the Sponsor's
9 1/2% Senior Subordinated Notes, issued pursuant to the Indenture.
"Offering Memorandum" has the meaning specified in Section
2.7(a).
"Officers' Certificate" means a certificate signed by (a) the
Chairman and Chief Executive Officer, President or Vice President, and by the
Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant
Secretary or (b) any two members of the Board of Directors of the Sponsor, and
delivered to the appropriate Trustee. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Declaration shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officers' Certificates;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Trust or the Sponsor, as the case may be, but, other than
in connection with the issuance of the Trust Securities, not an employee of any
thereof, and who shall be reasonably acceptable to the Preferred Trustee.
"Outstanding", when used with respect to Trust Securities
means, as of the date of determination, all Trust Securities theretofore
executed and delivered under this Declaration, except:
(a) Trust Securities theretofore canceled by the Trust or
delivered to the Trust for cancellation;
(b) Trust Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Preferred Trustee
or any Paying Agent for the Holders of such Trust Securities; provided, that if
such Trust Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Declaration; and
(c) Preferred Securities which have been paid or in exchange
for or in lieu of which other Preferred Securities have been executed and
delivered pursuant to Sections 5.4, 5.5
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or 5.6; provided, however, that in determining whether the Holders of the
requisite Liquidation Amount of the Outstanding Preferred Securities have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, Preferred Securities owned by the Sponsor, any Trustee or any
Affiliate of the Sponsor or any Trustee shall be disregarded and deemed not to
be Outstanding, except that (a) in determining whether any Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Preferred Securities that such Trustee knows to
be so owned shall be so disregarded and (b) the foregoing shall not apply at any
time when all of the outstanding Preferred Securities are owned by the Sponsor,
one or more of the Trustees and/or any such Affiliate. Preferred Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Company Trustees the
pledgee's right so to act with respect to such Preferred Securities and that the
pledgee is not the Sponsor or any Affiliate of the Sponsor.
"Owner" means each Person who is the beneficial owner of a
Global Certificate (see Exhibit B for definition) as reflected in the records of
the Clearing Agency or, if a Clearing Agency Participant is not the owner, then
as reflected in the records of a Person maintaining an account with such
Clearing Agency (directly or indirectly, in accordance with the rules of such
Clearing Agency).
"Participants" has the meaning set forth in Section 5.4(b).
"Paying Agent" means any paying agent or co-paying agent
appointed pursuant to Section 5.13 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing
corporate trust account maintained by the Preferred Trustee with the Bank in its
trust department for the benefit of the Securityholders in which all amounts
paid in respect of the Notes will be held and from which the Preferred Trustee
shall make payments to the Securityholders in accordance with Sections 4.1 and
4.2.
"Person" means any individual, corporation, estate,
partnership, joint venture, association, joint-stock company, trust, limited
liability company, unincorporated organization, or government or any agency,
instrumentality or political subdivision thereof, or any other entity of
whatever nature.
"Preferred Security Beneficial Owner" means, with respect to a
Book-Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Preferred Securities" has the meaning specified in Section
5.2(a).
"Preferred Securities Certificate" means a certificate
evidencing ownership of Preferred Securities, substantially in the form attached
as Exhibit D.
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"Preferred Securities Company Guarantee" means the guarantee
agreement dated as of August 12, 1997 of the Sponsor in respect of the Preferred
Securities.
"Preferred Trustee" means Wilmington Trust Company, a Delaware
banking corporation duly organized and existing under the laws of the State of
Delaware, solely in its capacity as Preferred Trustee of the Trust and not in
its individual capacity, or its successor in interest in such capacity, or any
successor Preferred Trustee appointed as herein provided.
"Purchase Agreement" means the Purchase Agreement dated August
7, 1997, for the offering and sale of Preferred Securities among the Trust, the
Sponsor and the initial purchasers named therein.
"QIBs" shall mean qualified institutional buyers as defined in
Rule 144A.
"Redemption Date" means, with respect to any Trust Security to
be redeemed, the date fixed for such redemption by or pursuant to this
Declaration; provided, that each Note Redemption Date and the stated maturity of
the Notes shall be a Redemption Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security,
the Redemption Price (as defined in the Indenture) for the concurrent redemption
of a Like Amount of Notes, allocated on a pro rata basis, plus accrued and
unpaid Distributions to the Redemption Date, plus the related amount of the
premium, if any, paid by the Sponsor upon the concurrent redemption of a Like
Amount of Notes, allocated on a pro rata basis (based on Liquidation Amounts)
among the Trust Securities.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, by and among Symons International
Group, Inc., the Trust and the Initial Purchasers named therein, as such
agreement may be amended, modified or supplemented from time to time.
"Regulation S" means Regulation S under the Securities Act, as
such regulation may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission.
"Regulation S Global Preferred Security" has the meaning set
forth in Section 5.4(a).
"Relevant Trustee" shall have the meaning specified in Section
8.10.
"Restricted Definitive Preferred Security" means Definitive
Preferred Securities required by Section 5.4(a) to contain the Restricted
Securities Legend.
"Restricted Global Preferred Security" means Restricted Global
Preferred Securities required by Section 5.6(g) to contain the Restricted
Securities Legend.
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"Restricted Preferred Security" means a Preferred Security
required by Section 5.6(g) to contain a Restricted Securities Legend.
"Restricted Securities Legend" has the meaning set forth in
Section 5.6(g).
"Rule 144" means Rule 144 under the Securities Act, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 5.8.
"Securityholder" or "Holder" means a Person in whose name a
Trust Security or Trust Securities is registered in the Securities Register; any
such Person being a beneficial owner within the meaning of the Delaware Business
Trust Act; provided, however, that in determining whether the Holders of the
requisite amount of Preferred Securities have voted on any matter provided for
in this Declaration, then for the purpose of any such determination, so long as
Definitive Preferred Securities Certificates have not been issued, the term
Securityholders or Holders as used herein shall refer to the Owners.
"Sponsor" means Symons International Group, Inc., a
corporation organized under the laws of the State of Indiana, including any
successors or assigns.
"Tax Event" means that the Sponsor shall have obtained an
Opinion of Counsel of independent tax counsel experienced in such matters to the
effect that, as a result of (a) any amendment to or change (including any
announced proposed change) in the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein or (b) any amendment to or change in an interpretation or application of
such laws or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination on or after the
date of issuance of the Preferred Securities), which amendment or change is
effective or which proposed change, interpretation or pronouncement is announced
on or after the date of issuance of the Preferred Securities under this
Declaration, there is more than an insubstantial risk that (i) the Trust is, or
will be, subject to United States federal income tax with respect to interest
received or accrued on the Notes, (ii) interest payable to the Trust on the
Notes is not or will not be deductible for United States federal income tax
purposes or (iii) the Trust is or will be subject to more than a de minimis
amount of other taxes, duties, assessments or other governmental charges of
whatever nature imposed by the United States or any other taxing authority.
"Trust" means SIG Capital Trust I, the Delaware business trust
created and continued hereby.
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"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means to the extent required by such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Notes, (b) any cash on deposit
in, or owing to, the Payment Account and (c) all proceeds and rights in respect
of the foregoing and any other property and assets for the time being held or
deemed to be held by the Preferred Trustee pursuant to the terms of this
Declaration.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common
Securities Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Preferred Trustee, the
Delaware Trustee and the Company Trustees.
"Unrestricted Global Preferred Securities" means those Global
Preferred Securities not required to contain a Restricted Securities Legend.
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ARTICLE II
ESTABLISHMENT OF THE TRUST
Section 2.1. Name.
The Trust created hereby shall be known as "SIG Capital Trust I," as
such name may be modified from time to time by the Company Trustees following
written notice to the Holders of Trust Securities and the other Trustees, in
which name the Trustees may conduct the business of the Trust, make and execute
contracts and other instruments on behalf of the Trust and sue and be sued.
Section 2.2. Office of the Delaware Trustee; Principal Place of
Business.
The address of the Delaware Trustee in State of Delaware is c/o
Wilmington Trust Company, 1100 North Market Street, Rodney Square North,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration, or such
other address in the State of Delaware as the Delaware Trustee may designate by
written notice to the Securityholders and the Sponsor. The principal executive
office of the Trust is c/o Symons International Group, Inc., 4720 Kingsway
Drive, Indianapolis, Indiana 46205.
Section 2.3. Initial Contribution of Trust Property; Organizational
Expenses.
The Preferred Trustee acknowledges receipt in trust from the Sponsor of
the sum of $10, which constituted the initial Trust Property. Pursuant to the
Indenture, the Sponsor, as borrower, shall pay organizational expenses of the
Trust as they arise or shall, upon request of any Trustee, promptly reimburse
such Trustee for any such expenses paid by such Trustee. The Sponsor shall make
no claim upon the Trust Property for the payment of such expenses.
Section 2.4. Issuance of the Preferred Securities.
The Sponsor, on behalf of the Trust, executed and delivered the
Purchase Agreement. Contemporaneously with the execution and delivery of this
Declaration, a Company Trustee, on behalf of the Trust, shall execute in
accordance with Section 5.2 and deliver to the Initial Purchasers named in the
Purchase Agreement Preferred Securities Certificates, registered in the name of
the nominee of the initial Clearing Agency, in an aggregate amount of 135,000
Preferred Securities having an aggregate Liquidation Amount of $135,000,000,
against receipt of such aggregate purchase price of such Preferred Securities of
$135,000,000, which amount the Company Trustee shall promptly deliver to the
Preferred Trustee.
Section 2.5. Issuance of the Common Securities; Subscription and
Purchase of the Notes.
Contemporaneously with the execution and delivery of this Declaration,
a Company Trustee, on behalf of the Trust, shall execute in accordance with
Section 5.2 and deliver to the Sponsor Common Securities Certificates,
registered in the name of the Sponsor, in an aggregate amount of 4,176 Common
Securities having an aggregate Liquidation Amount of $4,176,000 against payment
by the Sponsor of such amount. Contemporaneously therewith, a Company
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Trustee, on behalf of the Trust, shall subscribe to and purchase from the
Sponsor Notes, registered in the name of the Trust and having an aggregate
principal amount equal to $139,176,000, and, in satisfaction of the purchase
price for such Notes, a Company Trustee and the Preferred Trustee, on behalf of
the Trust, shall deliver to the Sponsor the sum of $139,176,000.
Section 2.6. Purposes and Functions of the Trust.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities and use the proceeds from such sale to acquire the Notes,
and (b) to engage in only those other activities necessary, convenient or
incidental thereto. The Sponsor hereby appoints the Trustees as trustees of the
Trust, to have all the rights, powers and duties to the extent set forth herein,
and the Trustees hereby accept such appointment. The Preferred Trustee hereby
declares that it will hold the Trust Property in trust upon and subject to the
conditions set forth herein for the benefit of the Trust and the
Securityholders. The Company Trustees shall have all rights, powers and duties
set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Preferred Trustee or the Company Trustees
set forth herein. Notwithstanding anything herein to the contrary, the Delaware
Trustee shall be one of the Trustees of the Trust for the sole and exclusive
purpose of fulfilling the requirements of Section 3807 of the Delaware Business
Trust Act.
Section 2.7. Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Declaration. Subject to the limitations set
forth in paragraph (b) of this Section, and in accordance with the following
provisions (i) and (ii), the Trustees shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
under this Declaration, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) As among the Trustees, each Company Trustee
shall have the power and authority to act on behalf of the Trust with respect to
the following matters:
(A) the issuance and sale of the Trust
Securities;
(B) to cause the Trust to enter into,
and to execute, deliver and perform on behalf of the Trust, the Registra-
tion Rights Agreement, the Certificate Depository Agreement and such other
agreements as may be necessary or desirable in connection with the purposes and
function of the Trust;
(C) assisting in the registration of the
Preferred Securities under the Securities Act and under state securities or
blue sky laws, and the qualification of this Declaration as a trust indenture
under the Trust Indenture Act;
(D) assisting in the preparation and
execution, if necessary, of an offering memorandum (the "Offering Memorandum")
in preliminary and final form, in relation
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to the offering and sale of Preferred Securities to QIBs in reliance on Rule
144A under the Securities Act, to institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and outside
the United States to non-U.S. Persons in offshore transactions in reliance on
Regulation S under the Securities Act;
(E) assisting in the registration of the
Preferred Securities under the Exchange Act in accordance with the terms of
the Registration Rights Agreement and in connection with the Exchange Offer
and the preparation and filing of all periodic and other reports and other
documents pursuant to the foregoing as well as in one or more applications to
exempt the Trust from the periodic reporting requirements of the Exchange Act;
(F) the sending of notices (other than
notices of default) and other information regarding the Trust Securityholders in
accordance with this Declaration;
(G) the appointment of a Paying Agent,
authenticating agent and Securities Registrar in accordance with this
Declaration;
(H) registering transfer of the Trust
Securities in accordance with this Declaration;
(I) to the extent provided in this
Declaration, the winding up of the affairs of and liquidation of the Trust and
the preparation, execution and filing of the certificate of cancellation with
the Secretary of State of the State of Delaware;
(J) unless otherwise required by the
Trust Indenture Act, to execute on behalf of the Trust (either acting alone or
together with any or all of the Company Trustees) any documents that the Company
Trustees have the power to execute pursuant to this Declaration; and
(K) the taking of any action incidental
to the foregoing as the Trustees may from time to time determine is necessary
or advisable to give effect to the terms of this Declaration for the benefit of
the Securityholders (without consideration of the effect of any such action
on any particular Securityholder).
(ii) As among the Trustees, the Preferred Trustee
shall have the power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment
Account;
(B) the receipt of the Notes;
(C) the collection of interest,
principal and any other payments made in respect of the Notes in the Payment
Account;
(D) the distribution of amounts owed to
the Securityholders in respect of the Trust Securities;
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(E) the exercise of all of the rights,
powers and privileges of a holder of the Notes;
(F) the sending of the notices of de-
fault and other information regarding the Trust Securities and the Notes to the
Securityholders in accordance with this Declaration;
(G) the distribution of the Trust
Property in accordance with the terms of this Declaration;
(H) to the extent provided in this
Declaration, the winding up of the affairs of and liquidation of the Trust and
the preparation, execution and filing of the certificate of cancellation with
the Secretary of State of the State of Delaware;
(I) after a Declaration Event of
Default, the taking of any action incidental to the foregoing as the Trustees
may from time to time determine is necessary or advisable to give effect to the
terms of this Declaration for the benefit of the Securityholders (without
consideration of the effect of any such action on any particular Security-
holder); and
(J) except as otherwise provided in this
Section 2.7(a)(ii), the Preferred Trustee shall have none of the duties,
liabilities, powers or the authority of the Company Trustees set forth in
Section 2.7(a)(i).
(b) So long as this Declaration remains in effect, the Trust
(or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, the Trustees shall not (i) acquire any
investments or engage in any activities not authorized by this Declaration, (ii)
sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose
of any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein, (iii) take any action that would cause the
Trust to fail or cease to qualify for United States federal income tax purposes
as a grantor trust or another entity which is not subject to United States
federal income tax purposes as held and derived directly by holders of interests
in the entity, (iv) incur any indebtedness for borrowed money or issue any other
debt or (v) take or consent to any action that would result in the placement of
a Lien on any of the Trust Property. The Company Trustees shall defend all
claims and demands of all Persons at any time claiming any Lien on any of the
Trust Property adverse to the interest of the Trust or the Securityholders in
their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Sponsor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Sponsor in furtherance of the following prior to the date
of this Declaration are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with
the Commission and the execution on behalf of the Trust of a registration
statement under the Securities Act on the appropriate form in relation to the
Preferred Securities, including any amendments thereto.
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(ii) the preparation and execution of the
Offering Memorandum in preliminary and final form, in relation to the offering
and sale of Preferred Securities to QIBs in reliance on Rule 144A under the
Securities Act, to institutional "accredited investors" (as defined in Rule 501
(a)(1), (2), (3) or (7) under the Securities Act) and outside the United States
to non-U.S. Persons in offshore transactions in reliance on Regulation S under
the Securities Act.
(iii) the determination of the States in which to
take appropriate action to qualify or register for sale all or part of the
Preferred Securities and the determination of any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and the advice to the
Trustees of actions they must take on behalf of the Trust, and the preparation
for execution and filing of any documents to be executed and filed by the Trust
or on behalf of the Trust, as the Sponsor deems necessary or advisable in order
to comply with the applicable laws of any such States;
(iv) the preparation for filing by the Trust with
the Commission and the execution on behalf of the Trust of registration
statement on Form 8-A relating to the registration of the Preferred Securities
under Section 12(b) or 12(g) of the Exchange Act, including any amendments
thereto;
(v) the negotiation of the terms of, and the
execution and delivery of, the Purchase Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Company Trustees are authorized and directed to conduct the affairs of the Trust
and to operate the Trust so that the Trust will not be deemed to be an
"investment company" required to be registered under the 1940 Act, or taxed as a
corporation for United States federal income tax purposes and so that the Notes
will be treated as indebtedness of the Sponsor for United States federal income
tax purposes. In this connection, the Sponsor and the Company Trustees are
authorized to take any action, not inconsistent with applicable law, the
Certificate of Trust or this Declaration, that each of the Sponsor and the
Company Trustees determines in their discretion to be necessary or desirable for
such purposes, as long as such action does not adversely affect in any material
respect the interests of the Holders of Preferred Securities.
Section 2.8. Assets of Trust.
The assets of the Trust shall consist of the Trust Property.
Section 2.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Preferred Trustee (in its capacity as such) and shall be held and administered
by the Preferred Trustee for the benefit of the Trust and the Securityholders in
accordance with this Declaration.
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ARTICLE III
PAYMENT ACCOUNT
Section 3.1. Payment Account.
(a) On or prior to the Closing Date, the Preferred Trustee
shall establish the Payment Account. The Preferred Trustee and any agent of the
Preferred Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making withdrawals from the
Payment Account in accordance with this Declaration. All monies and other
property deposited or held from time to time in the Payment Account shall be
held by the Preferred Trustee in the Payment Account for the exclusive benefit
of the Securityholders and for distribution as herein provided, including (and
subject to) any priority of payments provided for herein.
(b) The Preferred Trustee shall deposit in the Payment
Account, promptly upon receipt, all payments of principal of or interest on, and
any other payments or proceeds with respect to, the Notes. Amounts held in the
Payment Account shall not be invested by the Preferred Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
Section 4.1. Distributions.
(a) Distributions on the Trust Securities shall be cumulative.
Distributions shall accrue from August 15, 1997, and shall be payable
semi-annually in arrears on February 15 and August 15 of each year, commencing
on February 15, 1998, when and if the Trust has funds available for payment. If
any date on which a Distribution is otherwise payable on the Trust Securities is
not a Business Day, then the payment of such Distribution shall be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, payment of such Distribution shall be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on such date (each date on which distributions are payable in
accordance with this Section 4.1(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial
ownership interests in the Trust Property. Distributions on the Trust Securities
shall be payable at a rate of 9 1/2% per annum of the Liquidation Amount of the
Trust Securities. Distributions in arrears for more than one semi-annual period
(and interest thereon) will accrue interest (compounded semi-annually) at the
same rate. The amount of Distributions payable for any full period shall be
computed on the basis of a 360-day year of twelve 30-day months. The amount of
Distributions for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30-day months.
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(c) Distributions on the Trust Securities shall be made by the
Preferred Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then legally
available in the Payment Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be one day prior to such Distribution Date; provided, however, that in the
event that the Preferred Securities do not remain in book-entry-only form, the
relevant record date shall be the date 15 days prior to the relevant
Distribution Date.
(e) Upon the occurrence of any event specified in Section 2(e)
of the Registration Rights Agreement, additional interest will accrue on the
principal amount of the Senior Subordinated Notes, and, as a result, on the
liquidation amount of Preferred Securities, in the amounts set forth in and
otherwise in accordance with Section 3.7 of the Indenture.
Section 4.2. Redemption.
(a) On each Note Redemption Date and on the stated maturity of
the Notes, the Trust will be required to redeem a Like Amount of Trust
Securities at the Redemption Price. The Trust Securities shall not be redeemed
unless all accrued and unpaid Distributions have been paid on all Trust
Securities for all semi-annual distribution periods terminating on or prior to
the Redemption Date.
(b) Notice of redemption shall be given by the Preferred
Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date to each Holder of Trust Securities to
be redeemed, at such Holder's address appearing in the Security Register. All
notices of redemption shall be irrevocable and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust
Securities are to be redeemed, the identification and the total Liquidation
Amount of the particular Trust Securities to be redeemed; and
(v) that on the Redemption Date that the
Redemption Price will become due and payable upon each such Trust Security to be
redeemed and that distributions thereon will cease to accrue on and after said
date.
(c) The Trust Securities redeemed on each Redemption Date
shall be redeemed at the Redemption Price with the proceeds from the
contemporaneous redemption of Notes. Redemptions of the Trust Securities shall
be made and the Redemption Price shall be payable on
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each Redemption Date only to the extent that the Trust has funds then legally
available in the Payment Account for the payment of such Redemption Price.
(d) If the Preferred Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 12:00 noon, New York City time, on
the Redemption Date, subject to Section 4.2(c), the Preferred Trustee will, with
respect to the Preferred Securities that are in book-entry-only form,
irrevocably deposit with the Clearing Agency for the Preferred Securities funds
sufficient to pay the applicable Redemption Price to the holders thereof. With
respect to the Preferred Securities that are no longer in book-entry-only form,
the Preferred Trustee, subject to Section 4.2(c), will irrevocably deposit with
the Payment Agent funds sufficient to pay the applicable Redemption Price to the
Holders thereof upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust Securities as they appear on the Register for the
Trust Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of Securityholders
holding Trust Securities so called for redemption will cease, except for the
right of such Securityholders to receive the Redemption Price and any
Distributions payable on or prior to the Redemption Date, but without interest
on the Redemption Price. In the event that any date on which any Redemption
Price is payable is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a Business
Day (without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of any Trust Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by the
Sponsor pursuant to the Guarantee, Distributions on such Trust Securities will
continue to accrue, at the then applicable rate, from the Redemption Date
originally established by the Trust for such Trust Securities to the date such
Redemption Price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the Redemption Price
(other than for purposes of calculating any premium).
(e) Payment of the Redemption Price on the Trust Securities
shall be made to the record holders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall be
one day prior to the relevant Redemption Date; provided, however, that with
respect to the Preferred Securities that are not in book-entry-only form, the
relevant record date shall be the date 15 days prior to the relevant Redemption
Date. In the event that any date on which payment of the Redemption Price on the
Preferred Securities is not a Business Day, payment of the Redemption Price
shall be made in accordance with Section 4.1(d) above.
(f) Subject to Section 4.3(a), if less than all the
Outstanding Trust Securities are to be redeemed on a Redemption Date, then the
aggregate Liquidation Amount of Trust Securities to be redeemed shall be
allocated on a pro rata basis (based on Liquidation Amounts) among the Common
Securities and the Preferred Securities. The particular Preferred Securities to
be redeemed shall be redeemed on a pro rata basis (based on Liquidation Amounts)
not more than 60 days prior to the Redemption Date by the Preferred Trustee from
the Outstanding Preferred Securities not previously called for redemption. The
Preferred Trustee shall promptly
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notify the Security Registrar in writing of the Preferred Securities selected
for redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
this Declaration, unless the context otherwise requires, all provisions relating
to the redemption of Preferred Securities shall relate, in the case of any
Preferred Securities redeemed or to be redeemed only in part, to the portion of
the Liquidation Amount of Preferred Securities that has been or is to be
redeemed.
(g) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), the Sponsor or its
subsidiaries may at any time and from time to time purchase Outstanding
Preferred Securities by tender, in the open market or by private agreement.
Section 4.3. Subordination of Common Securities.
Payment of Distributions on, and the Redemption Price of, the Trust
Securities, as applicable, shall be made, subject to Section 4.2(f), pro rata
among the Common Securities and the Preferred Securities based on the respective
Liquidation Amounts of the Trust Securities; provided, however, that if on any
Distribution Date or Redemption Date a Declaration Event of Default shall have
occurred and be continuing, no payment of any Distribution on, or Redemption
Price of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of accumulated and unpaid Distributions on all
Outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price the full amount
of such Redemption Price on all Outstanding Preferred Securities, shall have
been made or provided for, and all funds available to the Preferred Trustee
shall first be applied to the payment in full in cash of all Distributions on,
or the Redemption Price of, Preferred Securities then due and payable.
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Section 4.4. Payment Procedures.
Payments of Distributions in respect of the Preferred Securities shall
be made by check mailed to the address of the Person entitled thereto as such
address shall appear on the Securities Register or, if the Preferred Securities
are held by a Clearing Agency, such Distributions shall be made to the Clearing
Agency in immediately available funds, which shall credit the relevant Persons'
accounts at such Clearing Agency on the applicable distribution dates. Payments
in respect of the Common Securities shall be made in such manner as shall be
mutually agreed between the Preferred Trustee and the Common Security
Securityholder.
Section 4.5. Tax Returns and Reports.
The Company Trustees shall prepare (or cause to be prepared), at the
expense of the Sponsoras issuer of the Notes, and file all United States
federal, state and local tax and information returns and reports required to be
filed by or in respect of the Trust. In this regard, the Company Trustees shall
(a) prepare and file (or cause to be prepared and filed) the appropriate
Internal Revenue Service Form required to be filed in respect of the Trust in
each taxable year of the Trust and (b) prepare and furnish (or cause to be
prepared and furnished) to each Securityholder the appropriate Internal Revenue
Service form required to be provided on such form. The Company Trustees shall
comply with United States federal withholding and backup withholding tax laws
and information reporting requirements with respect to any payments to
Securityholders under the Trust Securities.
Section 4.6. Payment of Taxes, Duties, Etc. of Trust.
Pursuant to Section 10.18 of the Indenture, the Sponsor, in its
capacity as issuer of the Notes, has agreed to pay any taxes, duties or
governmental charges of whatsoever nature (other than withholding taxes) imposed
on the Trust by the United States or any other taxing authority.
Section 4.7. Payments under Indenture.
Any amount payable hereunder to any Holder of Preferred Securities
shall be reduced by the amount of any corresponding payment such Holder (and any
Owner with respect thereto) has directly received pursuant to Section 5.12 of
the Indenture.
ARTICLE V
TRUST SECURITIES CERTIFICATES
Section 5.1. Initial Ownership.
Upon the creation of the Trust and the contribution by the Sponsor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no trust Securities are outstanding, the Sponsor shall be
the sole beneficial owner of the Trust.
Section 5.2. General Provisions Regarding Trust Securities.
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The Company Trustees shall, on behalf of the Trust, issue one class of
preferred securities representing undivided beneficial interests in the assets
of the Trust, which class may be divided into no more than two series (the
"Preferred Securities"), and one class of common securities representing
undivided beneficial interests in the assets of the Trust, which class may be
divided into no more than two series (the "Common Securities"). The Trust is
hereby authorized to issue Preferred Securities in accordance with and as
contemplated by the Registration Rights Agreement. The Trust shall issue no
securities or other interests in the assets of the Trust other than the
Preferred Securities and the Common Securities.
The consideration received by the Trust for the issuance of the Trust
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
Upon issuance of the Trust Securities as provided in this Declaration,
the Trust Securities so issued shall be deemed to be validly issued, fully paid
and non-assessable.
Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.
Section 5.3. Execution and Authentication.
The Trust Securities shall be signed on behalf of the Trust by a
Company Trustee. In case any Company Trustee of the Trust who shall have signed
any of the Trust Securities shall cease to be such Company Trustee before the
Trust Securities so signed shall have been delivered by the Trust, such Trust
Securities nevertheless may be delivered as though the Person who signed such
Trust Securities had not ceased to be such Company Trustee; and any Trust
Securities may be signed on behalf of the Trust by such Person who, at the
actual date of execution of such Trust Security, shall be the Company Trustees
of the Trust, although at the date of the execution and delivery of the
Declaration any such Person was not such a Company Trustee.
One Company Trustee shall sign the Preferred Securities for the Trust
by manual or facsimile signature. Unless otherwise determined by the Trust, such
signature shall, in the case of the Common Securities, be a manual signature.
A Preferred Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Preferred Trustee. The
signature shall be conclusive evidence that the Preferred Security has been
authenticated under this Declaration.
Upon written order of the Trust signed by one Company Trustee, the
Preferred Trustee shall authenticate the Preferred Securities for original
issue. The aggregate number of Preferred Securities outstanding at any time
shall not exceed 130,000, except as provided in Section 5.8.
The Preferred Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Preferred Securities. An authenticating agent may
authenticate Preferred Securities whenever the Preferred Trustee may do so. Each
reference in this Declaration to authentication
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by the Preferred Trustee includes authentication by such agent. An
authenticating agent has the same rights as the Preferred Trustee to deal with
the Sponsor or an Affiliate.
Section 5.4. Form and Dating.
The Preferred Securities and the Preferred Trustee's certificate of
authentication shall be substantially in the form of Exhibit D, and the Common
Securities shall be substantially in the form of Exhibit C, each of which being
hereby incorporated in and expressly made a part of this Declaration.
Certificates representing the Trust Securities may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Company Trustees, as evidenced by their execution thereof. The Trust
Securities may have letters, CUSIP or other numbers, notations or other marks of
identification or designation and such legends or endorsements required by law,
stock exchange rule, agreements to which the Trust is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the the Company Trustees). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit D to the Preferred Trustee in
writing. Each Preferred Security shall be dated the date of its authentication.
The forms of Trust Securities set forth in Exhibits C and D are part of the
terms of this Declaration and to the extent applicable, the Preferred Trustee,
the Company Trustees and the Sponsor, by their execution and delivery of the
Declaration, expressly agree to be bound thereby.
(a) Global Securities. Trust Securities offered and sold to
QIBs in reliance on Rule 144A, offered and sold outside the United States to
non-U.S. Persons in offshore transactions in reliance on Regulation S or offered
and sold to "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or
(7)) who did not purchase Preferred Securities in reliance on Regulation S, as
provided in the Purchase Agreement, shall be issued in the form of one or more
permanent Global Securities in definitive, fully registered form without
Distribution coupons with the appropriate global legends and Restricted
Securities Legend set forth in Exhibit D hereto (respectively, a "Restricted
Global Preferred Security," a "Regulation S Preferred Security" and an
"Accredited Investor Global Preferred Security,"), which shall be deposited on
behalf of the purchasers of the Preferred Securities represented thereby with
the Preferred Trustee, at its Wilmington, Delaware office, as custodian for the
Clearing Agency, and registered in the name of the Clearing Agency or a nominee
of the Clearing Agency, duly executed by the Trust and authenticated by the
Preferred Trustee as herein provided. The number of Preferred Securities
represented by the Restricted Global Preferred Security, the Regulation S Global
Preferred Security and the Accredited Investor Global Preferred Security may
from time to time be increased or decreased by adjustments made on the records
of the Preferred Trustee and the Clearing Agency or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 5.4(b) shall apply
only to the Restricted Global Preferred Securities, the Regulation S Global
Preferred Securities, and the Accredited Investor Global Preferred Securities
and such other Preferred Securities in global form as may be authorized by the
Trust to be deposited with or on behalf of the Clearing Agency.
A Company Trustee on behalf of the Trust shall execute and the
Preferred Trustee shall, in accordance with this Section 5.4 authenticate and
make available for delivery initially one or more Restricted Global Preferred
Securities, one or more Regulation S Global Preferred
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Securities and one or more Accredited Investor Global Preferred Securities that
(i) shall be registered in the name of Cede & Co. or other nominee of such
Clearing Agency and (ii) shall be delivered by the Preferred Trustee to such
Clearing Agency or pursuant to such Clearing Agency's written instructions or
held by the Preferred Trustee as custodian for the Clearing Agency.
Members of, or participants in, the Clearing Agency
("Participants") shall have no rights under this Declaration with respect to any
Restricted Global Preferred Security, any Regulation S Global Preferred Security
or any Accredited Investor Global Preferred Security held on their behalf by the
Clearing Agency or by the Preferred Trustee as the custodian of the Clearing
Agency or under such Restricted Global Preferred Security, such Regulations S
Preferred Security or such Accredited Investor Global Preferred Security, and
the Clearing Agency may be treated by the Trust, the Preferred Trustee and by
agents of the Trust or the Preferred Trustee as the absolute owner of such
Restricted Global Preferred Security, such Regulation S Global Preferred
Security or such Accredited Investor Global Preferred Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Trust, the Preferred Trustee or any agent of the Trust or the Preferred Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Clearing Agency or impair, as between the Clearing Agency and
its Participants, the operations or customary practices of such Clearing Agency
governing the exercise of the rights of a holder of beneficial interest in any
Restricted Global Preferred Security, any Regulation S Global Preferred Security
or any Accredited Investor Global Preferred Security.
(c) Definitive Preferred Securities. Except as provided in
Section 5.6, owners of a beneficial interest in a Restricted Global Preferred
Security, a Regulation S Global Preferred Security or an Accredited Investor
Global Preferred Security will not be entitled to receive physical delivery of
certificated Preferred Securities ("Definitive Preferred Securities").
Definitive Preferred Securities will bear the Restricted Securities Legend set
forth on Exhibit D unless removed in accordance with this Section 5.4. or
Section 5.6.
Section 5.5. Transfer of Trust Securities.
(a) Trust Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions set forth in this Declaration
and in the terms of the Trust Securities. To the fullest extent permitted by
law, any transfer or purported transfer of any Trust Security not made in
accordance with this Declaration shall be null and void.
(b) Subject to the transfer requirements provided in this
Article IV, Preferred Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration. Any
transfer or purported transfer of any Preferred Security not made in accordance
with this Declaration shall be null and void.
(c) Subject to Section 9.5 and except as provided in Article
VIII of the Indenture, to the fullest extent permitted by law, the Sponsor may
not transfer the Common Securities.
(d) The Company Trustees shall provide for the registration of
Securities and of the transfer of Securities, which will be effected without
charge but only upon payments (with
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indemnity as the Company Trustees may require) in respect of any tax or other
governmental charges that may be imposed in relation to it. Upon surrender for
registration of transfer of any Trust Securities, the Company Trustees shall
cause one or more new Trust Securities to be issued in the name of the
designated transferee or transferees. Every Trust Security surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Company Trustees duly executed by the
Holder or such Holder's attorney duly authorized in writing. Each Trust Security
surrendered for registration of transfer shall be canceled by the Company
Trustees. A transferee of a Trust Security shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon receipt by such transferee
of a Trust Security. By acceptance of a Trust Security, each transferee shall be
deemed to have expressly assumed and agreed to the terms of, and shall be bound
by, this Declaration.
Section 5.6. Transfer Procedures and Restrictions.
General. If Preferred Securities are issued upon the transfer, exchange
or replacement of Preferred Securities bearing the Restricted Securities Legend
in Exhibit D hereto, or if a request is made to remove the Restricted Securities
Legend on Preferred Securities, the Preferred Securities so issued shall bear
the Restricted Securities Legend, or the Restricted Securities Legend shall not
be removed, as the case may be, unless there is delivered to the Trust and the
Preferred Trustee such satisfactory evidence, which shall include an Opinion of
Counsel licensed to practice law in the State of New York, as may be reasonably
required by the Sponsor and the Preferred Trustee, that neither the legend nor
the restrictions on transfer set forth therein are required to ensure that
transfers thereof are made pursuant to an exception from the registration
requirements of the Securities Act or, with respect to Restricted Securities,
that such Trust Securities are not "restricted" within the meaning of Rule 144.
Upon provision of such satisfactory evidence, the Preferred Trustee, at the
written direction of a Company Trustee on behalf of the Trust, shall
authenticate and deliver Preferred Securities that do not bear the legend.
(a) Transfer and Exchange of Definitive Preferred
Securities. When Definitive Preferred Securities are presented to the Securities
Registrar:
(i) to register the transfer of such Definitive
Preferred Securities or
(ii) to exchange such Definitive Preferred
Securities which became mutilated, defaced, stolen or lost, for an equal number
of Definitive Preferred Securities, the Securities Registrar shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that the Definitive Preferred
Securities are surrendered for transfer or exchange:
(x) shall be duly endorsed or
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Trust and the Securities Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing; and
(y) in the case of Definitive Preferred
Securities that are Restricted Definitive Preferred Securities:
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(A) if such Restricted
Preferred Securities are being delivered to the Securities Registrar by a Holder
for registration in the name of such Holder without transfer, a certification
from such Holder to that effect; or
(B) if such Restricted
Preferred Securities are being transferred: (x) a certification from the
transferor in a form substantially similar to that attached hereto as the
"Assignment" in Exhibit D, and (y) if the Trust or Securities Registrar so
requested, evidence reasonably satisfactory to them as to the compliance with
the restrictions set forth with the Restricted Securities Legend.
(b) Restrictions on Transfer of a Definitive Preferred
Security for a Beneficial Interest in a Global Preferred Security. A Definitive
Preferred Security may not be exchanged for a beneficial interest in a Global
Preferred Security except upon satisfaction of the requirements set forth below.
Upon receipt by the Preferred Trustee of a Definitive Preferred Security, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Preferred Trustee, together with:
(i) if such Definitive Preferred Security is a
Restricted Preferred Security, a written certificate (in a form substantially
similar to that attached hereto as the "Assignment" in Exhibit D); provided,
however, that such Definitive Preferred Security may only be exchanged for any
interest in a Regulation S Global Security where such Definitive Preferred
Security is being transferred pursuant to Regulation S or Rule 144 (if
available); and
(ii) whether or not such Definitive Preferred
Security is a Restricted Preferred Security, written instructions directing the
Preferred Trustee to make, or to direct the Clearing Agency to make, an
adjustment on its books and records with respect to the appropriate Global
Preferred Security to reflect an increase in the number of the Preferred
Securities represented by such Global Preferred Security, then the Preferred
Trustee shall cause such Definitive Preferred Security and cause, or direct the
Clearing Agency to cause, the aggregate number of Preferred Securities
represented by the appropriate Global Preferred Security to be increased
accordingly. If no Global Securities are then outstanding, a Company Trustee
shall cause the Trust to issue and the Preferred Trustee shall authenticate,
upon written order of any Company Trustee, an appropriate number of Preferred
Securities in global form.
(c) Transfer and Exchange of Global Preferred Securities.
Subject to Section 5.6(d), the transfer and exchange of Global Preferred
Securities or beneficial interests therein shall be effected through the
Clearing Agency in accordance with this Declaration (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Clearing Agency therefor.
(d) Transfer of a Beneficial Interest in a Global Preferred
Security for a Definitive Preferred Security. Any Person having a beneficial
interest in a Global Preferred Security may upon request, but only upon 20 days
prior notice to the Preferred Trustee, and if accompanied by the information
specified below, exchange such beneficial interest for a Definitive Preferred
Security representing the same number of Preferred Securities. Upon receipt by
the Preferred Trustee from the Clearing Agency or its nominee on behalf of any
Person having a beneficial interest in a Global Preferred Security of written
instructions or such other form of
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instructions as is customary for the Clearing Agency or the Person designated by
the Clearing Agency as having such a beneficial interest in a Restricted
Preferred Security and a certification from the transferor (in a form
substantially similar to that attached hereto as the "Assignment" in Exhibit D),
which may be submitted by facsimile, then the Preferred Trustee will cause the
aggregate number of Preferred Securities represented by Global Preferred
Securities to be reduced on its books and records and, following such reduction,
a Company Trustee on behalf of the Trust will execute and the Preferred Trustee
will authenticate and make available for delivery to the transferee a Definitive
Preferred Security.
Definitive Preferred Securities issued in exchange for a
beneficial interest in a Global Preferred Security pursuant to this Section
5.6(d) shall be registered in such names and in such authorized denominations as
the Clearing Agency pursuant to instruction from its Participants or indirect
participants or otherwise, shall instruct the Preferred Trustee in writing. The
Preferred Trustee shall deliver such Preferred Securities to the Person in whose
names such Preferred Securities are so registered in accordance with the
instructions of the Clearing Agency.
(e) Restrictions on Transfer and Exchange of Global Preferred
Securities. Notwithstanding any other provisions in the Declaration (other than
the provisions set forth in Section 5.6(f)), a Global Preferred Security may not
be transferred as a whole except by the Clearing Agency to a nominee of the
Clearing Agency or another nominee of the Clearing Agency or by the Clearing
Agency or a nominee of such successor Clearing Agency.
(i) Beneficial interests in the Accredited
Investor Global Preferred Security may be, and prior to the expiration of the
restricted period, as contemplated by Regulation S, beneficial interests in the
Regulation S Global Preferred Security may be exchanged for beneficial interests
in the Restricted Global Preferred Security only if such exchange occurs in
connection with a transfer of the Preferred Securities pursuant to Rule 144A and
the transferor first delivers to the Trustee a written certificate (in a form
substantially similar to that attached hereto as the "Assignment" in Exhibit D)
to the effect that the Preferred Securities are being transferred to a Person
who the transferor reasonably believes is a QIB, purchasing for its own account
or the account of a QIB in a transaction meeting the requirements of Rule 144A
and in accordance with all applicable securities laws of the states of the
United States and other jurisdictions.
(ii) Beneficial interests in the Restricted
Global Preferred Security may be, and prior to the expiration of the restricted
period, as contemplated by Regulation S, beneficial interests in the Regulation
S Global Preferred Security may be, exchanged for beneficial interests in the
Accredited Investor Global Preferred Security only if such exchange occurs in
connection with a transfer of the Preferred Securities to an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is acquiring the Preferred Security
for its own account, or for the account of such institutional accredited
investor, for investment purposes and not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act.
(iii) Beneficial interests in the Restricted
Global Preferred Security or in the Accredited Investor Global Preferred
Security may be transferred to a Person who takes delivery in the form of an
interest in the Regulation S Global Preferred Security, whether before
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or after the expiration of such restricted period, as contemplated by Regulation
S, only if the transferor first delivers to the Preferred Trustee a written
certificate (in a form substantially similar to that attached hereto as the
"Assignment" in Exhibit D) to the effect that such transfer is being made in
accordance with Rule 903 or 904 of Regulations S or Rule 144 (if available) and
that, if such transfer occurs prior to the expirations of such restricted
period, the interest transferred will be held immediately thereafter through
Euroclear or CEDEL.
(f) Authentication of Definitive Preferred Securities.
If at any time:
(i) there occurs a Declaration Event of Default
which is continuing, or
(ii) a Company Trustee on behalf of the Trust, in
its sole discretion, notifies the Preferred Trustee in writing that it elects to
cause the issuance of Definitive Preferred Securities under this Declaration,
then a Company Trustee on behalf of the Trust will execute, and the Preferred
Trustee, upon receipt of a written order of the Trust signed by one Company
Trustee requesting authentication and delivery of Definitive Preferred
Securities to the Persons designated by the Trust, will authenticate and make
available for delivery Definitive Preferred Securities, equal in number to the
number of Preferred Securities represented by Global Preferred Securities, in
exchange for such Global Preferred Securities.
(g) Legend.
(i) Except as permitted by the following
paragraph (ii), each Preferred Security Certificate evidencing the Global
Preferred Securities and the Definitive Preferred Securities (and all Preferred
Securities issued in exchange therefor or substitution thereof, except in the
Exchange Offer) shall bear a legend (the "Restricted Securities Legend") in
substantially the following form:
THE PREFERRED SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS PREFERRED SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THE PREFERRED SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS PREFERRED
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY
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"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS PREFERRED
SECURITY (OR ANY PREDECESSOR OF THIS PREFERRED SECURITY) ONLY
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) SO LONG AS THIS PREFERRED SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"),
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE OF RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-UNITED STATES PERSONS THAT OCCUR OUTSIDE THE
UNITED SATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
PREFERRED SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE
COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER, (i)
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM AND (ii) PURSUANT TO CLAUSE (E)
TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A LETTER
FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO
THE OFFERING MEMORANDUM DATED AUGUST 7, 1997. SUCH HOLDER
FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS PREFERRED SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND.
In the case of the Regulation S Global Preferred Security
THIS PREFERRED SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED
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OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, UNITED STATES PERSONS UNLESS REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE.
(ii) Upon any sale or transfer of a Restricted
Preferred Security (including any Restricted Preferred Security represented by a
Global Preferred Security) pursuant to an effective registration statement under
the Securities Act or pursuant to Rule 144 of the Securities Act:
(A) in the case of any Restricted
Preferred Security that is a Definitive Preferred Security, the Securities
Registrar shall permit the Holder thereof to exchange such Restricted Preferred
Security for a Definitive Preferred Security that does not bear the Restricted
Securities Legend and rescind any restriction on the transfer of such Restricted
Preferred Security; and
(B) in the case of any Restricted
Preferred Security that is represented by a Global Preferred Security, the
Securities Registrar shall permit the Holder of such Global Preferred Security
to exchange such Global Preferred Security for another Global Preferred Security
that does not bear the Restricted Securities Legend.
(h) Cancellation or Adjustment of Global Preferred Security.
At such time as all beneficial interests in a Global Preferred Security have
either been exchanged for Definitive Preferred Securities to the extent
permitted by this Declaration or redeemed, repurchased or canceled in accordance
with the terms of this Declaration, such Global Preferred Security shall be
returned to the Clearing Agency for cancellation or retained and canceled by the
Preferred Trustee. At any time prior to such cancellation, if any beneficial
interest in a Global Preferred Security is exchanged for Definitive Preferred
Securities, Preferred Securities represented by such Global Preferred Security
shall be reduced and an adjustment shall be made on the books and records of the
Preferred Trustee (if it is then the custodian for such Global Preferred
Security) with respect to such Global Preferred Security, by the Preferred
Trustee, to reflect such reduction.
(i) No Obligations of the Preferred Trustee. The Preferred
Trustee shall have no responsibility or obligation to any beneficial owner of a
Global Preferred Security, a Participant in the Clearing Agency or other Person
with respect to the accuracy of the records of the Clearing Agency or its
nominee or of any Participant thereof, with respect of any ownership interest in
the Preferred Securities or with respect to the delivery of any Participant,
beneficial owner or other Person (other than the Clearing Agency) of any notice
(including any notice of redemption) or the payment of any amount, under or with
respect to such Preferred Securities. All notices and communications to be given
to the Holders and all payments to be made to Holders under the Preferred
Securities shall be given or made only to or upon the order of the registered
Holders (which shall be the Clearing Agency or its nominee in the case of a
Global Preferred Security). The rights of beneficial owners in any Global
Preferred Security shall be exercised only through the Clearing Agency subject
to the applicable rules and procedures of the Clearing Agency. The Preferred
Trustee may conclusively rely and shall be fully protected in relying upon
information
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furnished by the Clearing Agency or any agent thereof with respect to its
Participants and any beneficial owners.
The Preferred Trustee and Securities Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance with any
restriction on transfer imposed under this Declaration or under applicable law
with respect to any transfer of any interest on any Preferred Security
(including any transfers between or among Clearing Agency Participants or
beneficial owners on any Global Preferred Security) other than to require
delivery of such certificates and other documentation or evidence as are
required by, and to do so if and when expressly required by law, the terms of
this Declaration, and to examine the same to determine substantial compliance as
to form with the express requirements hereof.
(j) Minimum Transfers. Preferred Securities may only be
transferred in minimum blocks of $100,000 aggregate Liquidation Amount until
such Preferred Securities are registered pursuant to an effective registration
statement filed under the Securities Act or are "unrestricted" pursuant to Rule
144 under the Securities Act.
Section 5.7. Temporary Securities.
(a) Until definitive Trust Securities are ready for delivery,
a Company Trustee on behalf of the Trust may prepare and, in the case of the
Preferred Securities, the Preferred Trustee shall authenticate temporary
Securities (the "Temporary Securities"). Temporary Securities shall be
substantially in the form of definitive Trust Securities but may have variations
that the Trust considers appropriate for temporary Trust Securities. Without
unreasonably delay, a Company Trustee on behalf of the Trust shall prepare, and
in the case of the Preferred Securities, the Preferred Trustee shall
authenticate definitive Securities in exchange for Temporary Securities.
(b) A Global Preferred Security deposited with the Clearing
Agency or with the Preferred Trustee as custodian for the Clearing Agency
pursuant to Section 5.4 shall be transferred to the beneficial owners thereof in
the form of certificated Preferred Securities only if such transfer complies
with Section 5.6 and (i) the Clearing Agency notifies the Company that it is
unwilling or unable to continue as Clearing Agency for such Global Preferred
Security or if at any time such Clearing Agency ceases to be a "clearing agency"
registered under the Exchange Act and a clearing agency is not appointed by the
Sponsor within 90 days of such notice, (ii) a Declaration Event of Default has
occurred and is continuing or (iii) the Trust at its sole discretion elects to
cause the issuance of certificated Preferred Securities.
(c) Any Global Preferred Security that is transferable to the
beneficial owners thereof in the form of certificated Preferred Securities
pursuant to this Section 5.7 shall be surrendered by the Clearing Agency to the
Preferred Trustee located in Wilmington, Delaware, to be so transferred, in
whole or from time to time in part, without charge, and the Preferred Trustee
shall authenticate and make available for delivery, upon such transfer of each
portion of such Global Preferred Security, an equal aggregate Liquidation Amount
of Securities of authorized denominations in the form of certificated Preferred
Securities. Any portion of Global Preferred Security also transferred pursuant
to this Section shall be registered in such names as the Clearing Agency shall
direct. Any Preferred Security in the form of certificated Preferred Security
also
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delivered in exchange for an interest in the Restricted Global Preferred
Security shall, except as otherwise provided by Sections 5.4 and 5.5, bear the
Restricted Securities Legend set forth in Exhibit D hereto.
(d) Subject to the provisions of Section 5.7(c), the Holder of
a Global Preferred Security may grant proxies and otherwise authorize any
Person, including Participants and Persons that may hold interests through
Participants, to take any action which such Holder is entitled to take under
this Declaration or the Trust Securities.
(e) In the event of the occurrence of any of the events
specified in Section 5.7(b), the Trust will promptly make available to the
Preferred Trustee a reasonable supply of certificated Preferred Securities in
fully registered form without Distribution coupons.
Section 5.8. Securities Register and Securities Registrar.
The Sponsor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.8, a register or registers for the purpose of
registering Trust Securities Certificates and transfers and exchanges of
Preferred Securities Certificates (the "Securities Register") in which the
registrar designated by the Sponsor (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for the
registration of Preferred Securities Certificates and Common Securities
Certificates (subject to Section 5.10 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Preferred
Securities Certificates as herein provided. The Preferred Trustee shall be the
initial Securities Registrar.
Section 5.9. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Company Trustees such security or indemnity as may be required
by them to save each of them harmless, then in the absence of notice that such
Trust Securities Certificate shall have been acquired by a bona fide purchaser,
the Company Trustees, or any one of them, on behalf of the Trust, shall execute
and make available for delivery, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust
Securities Certificate of like class, tenor and denomination. In connection with
the issuance of any new Trust Securities Certificate under this Section, the
Company Trustees or the Securities Registrar may require the payment of a sum
sufficient to pay any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Trust Securities Certificate issued pursuant
to this Section shall constitute conclusive evidence of an undivided beneficial
interest in the assets of the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Securities Certificate shall be found at any
time.
Section 5.10. Persons Deemed Securityholders.
The Company Trustees or the Securities Registrar shall treat the Person
in whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving distributions and for all other purposes
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whatsoever, and neither the Company Trustees nor the Securities Registrar shall
be bound by any notice to the contrary.
Section 5.11. Access to List of Securityholders' Names and Addresses.
Each Holder of a Trust Securities Certificate, and each Owner shall be
deemed to have agreed not to hold the Sponsor, the Preferred Trustee, the
Delaware Trustee or the Company Trustees accountable by reason of the disclosure
of its name and address, regardless of the source from which such information
was derived.
Section 5.12. Maintenance of Office or Agency.
The Company Trustees shall maintain an office or offices or agency or
agencies where Preferred Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Securities Certificates may be served. The
Company Trustees initially designate Wilmington Trust Company, 1100 North Market
Street, Rodney Square North, Wilmington, Delaware, Attention: Corporate Trust
Administration, as its principal corporate trust office for such purposes. The
Company Trustees shall give prompt written notice to the Sponsor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency.
Section 5.13. Appointment of Paying Agent.
The Paying Agent shall make distributions to Securityholders from the
Payment Account and shall report the amounts of such distributions to the
Preferred Trustee and the Company Trustees. Any Paying Agent shall have the
revocable power to withdraw funds from the Payment Account for the purpose of
making the distributions referred to above. The Company Trustees may revoke such
power and remove the Paying Agent if such Trustees determine in their sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Declaration in any material respect. The Paying Agent shall initially
be the Bank, and any co-paying agent chosen by the Bank, and acceptable to the
Company Trustees and the Sponsor. Any Person acting as Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Company
Trustees, the Preferred Trustee and the Sponsor. In the event that the Bank
shall no longer be the Paying Agent or a successor Paying Agent shall resign or
its authority to act be revoked, the Company Trustees shall appoint a successor
that is acceptable to the Preferred Trustee and the Sponsor to act as Paying
Agent (which shall be a bank or trust company). The Company Trustees shall cause
such successor Paying Agent or any additional Paying Agent appointed by the
Company Trustees to execute and deliver to the Trustees an instrument in which
such successor Paying Agent or additional Paying Agent shall agree with the
Trustees that as Paying Agent, such successor Paying Agent or additional Paying
Agent will hold all sums, if any, held by it for payment to the Securityholders
in trust for the benefit of the Securityholders entitled thereto until such sums
shall be paid to such Securityholders. The Paying Agent shall return all
unclaimed funds to the Preferred Trustee, and upon removal of a Paying Agent
such Paying Agent shall return all funds in its possession to the Preferred
Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the
Bank also in its role as Paying Agent, for so long as the Bank shall act as
Paying Agent and, to the extent applicable, to any other Paying Agent appointed
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hereunder. Any reference in this Declaration to the Paying Agent shall include
any co-paying agent unless the context requires otherwise.
Section 5.14. Ownership of Common Securities by Sponsor.
On the Closing Date, the Sponsor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, other than a transfer in connection with a consolidation or merger of
the Sponsor into another Person, or any conveyance, transfer or lease by the
Sponsor of its properties and assets substantially as an entirety to any Person,
pursuant to Section 8.1 of the Indenture, any attempted transfer of the Common
Securities shall be void. The Company Trustees shall cause each Common
Securities Certificate issued to the Sponsor to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN THE DECLARATION."
Section 5.15. Rights of Securityholders.
(a) The legal title to the Trust Property is vested
exclusively in the Preferred Trustee (in its capacity as such) in accordance
with Section 2.9, and the Securityholders shall not have any right or title
therein other than the undivided beneficial ownership interest in the assets of
the Trust conferred by their Trust Securities and they shall have no right to
call for any partition or division of property, profits or rights of the Trust
except as described below. The Trust Securities shall be personal property
giving only the rights specifically set forth therein, in this Declaration and
in the Delaware Business Trust Act. The Trust Securities shall have no
preemptive or similar rights and when issued and delivered to Securityholders
against payment of the purchase price therefor will be fully paid and
nonassessable by the Trust. The Holders of the Trust Securities, in their
capacities as such, shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware without giving effect
to principles of conflict of laws.
(b) For so long as any Preferred Securities remain
Outstanding, if, upon a Declaration Event of Default, the Indenture Trustee
fails or the holders of not less than 25% in principal amount of the outstanding
Notes fail to declare the principal of all of the Notes to be immediately due
and payable, the Preferred Trustee shall have such right by a notice in writing
to the Sponsor and the Indenture Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the Notes shall become
immediately due and payable, provided, that the payment of principal and
interest on such Notes shall remain subordinated to the extent provided in the
Indenture.
At any time after such a declaration of acceleration with
respect to the Notes has been made and before a judgment or decree for payment
of the money due has been obtained by the Indenture Trustee as provided in the
Indenture, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Preferred Trustee, the Sponsor and the
Indenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Sponsor has paid or deposited with the
Indenture Trustee a sum sufficient to pay:
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(A) all overdue installments of interest
on all of the Notes,
(B) the principal of (and premium, if
any, on) any Notes which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, and
(C) all sums paid or advanced by the
Indenture Trustee under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, the Preferred Trustee and
the Delaware Trustee, their agents and counsel; and
(ii) any Note Event of Default, other than the
non-payment of the principal of the Notes which has become due solely by such
acceleration, has been cured or waived as provided in Section 5.13 of the
Indenture.
In the case of any Declaration Event of Default, the Holder of
Common Securities will be deemed to have waived any such Declaration Event of
Default under this Declaration until all such Declaration Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated. Until any such Declaration Events of Default with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Trustees shall act solely on behalf of the Holders of Preferred Securities and
not the Holder of the Common Securities, and only the Holders of Preferred
Securities will have the right to direct the Trustees to act on their behalf.
The Holders of a majority in aggregate Liquidation Amount of
the Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default under the Indenture, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Note. No such rescission shall affect any subsequent default or impair any right
consequent thereon. The Preferred Trustee shall not, as the initial holder of
the Notes, for so long as it holds such Notes, waive any Note Event of Default
without the consent of Holders of a majority in aggregate Liquidation Amount of
Preferred Securities then Outstanding.
A waiver of a Note Event of Default will constitute a waiver
of the corresponding Declaration Event of Default.
Upon receipt by the Preferred Trustee of written notice
declaring such rescission and annulment by Holders of Preferred Securities all
or part of which is represented by Book- Entry Preferred Securities
Certificates, a record date shall be established for determining Holders of
Outstanding Preferred Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Preferred Trustee receives
such notice. The Holders on such record date, or their duly designated proxies,
and only such Persons, shall be entitled to join in such notice, whether or not
such Holders remain Holders after such record date; provided, that, unless such
declaration of rescission and annulment shall have become effective by virtue of
the requisite percentage having joined in such notice prior to the day which is
90 days after such
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record date, such notice of declaration of rescission and annulment shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of
a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of rescission and annulment that is identical to a written
notice which has been canceled pursuant to the proviso to the preceding
sentence, in which event a new record date shall be established pursuant to the
provisions of this Section 5.15(c).
(c) For so long as any Preferred Securities remain
Outstanding, to the fullest extent permitted by law and subject to the terms of
this Declaration and the Indenture, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Sponsor to pay interest on or principal of the Notes on the date such interest
or principal is otherwise payable (or in the case of redemption, the redemption
date), then the Holders of at least 25% in Liquidation Amount of the Outstanding
Preferred Securities shall have the right to appoint a trustee (the "Special
Trustee") to act on behalf of all Holders of Preferred Securities. The Special
Trustee so appointed shall represent the Holders of all Outstanding Preferred
Securities unless Holders of at least a majority in Liquidation Amount of the
Outstanding Preferred Securities appoint an alternative Special Trustee, in
which case the Special Trustee appointed in accordance with the preceding
sentence shall resign as Special Trustee. At no time can there be more than one
Special Trustee acting on behalf of the Holders of Preferred Securities. To the
fullest extent permitted by law, the Special Trustee shall have the right to
directly institute a proceeding against the Sponsor (a "Trustee Action") for
enforcement of payment to Holders of Preferred Securities of the principal of or
interest on the Notes having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such Holders. In connection
with any such Trustee Action, the rights of the Holder of the Common Securities
will be subrogated to the rights of any Holder of Preferred Securities to the
extent of any payment made by the Sponsor to such Holder of Preferred Securities
as a result of such Trustee Action. Except as set forth in Sections 5.15(b) and
(c), the Holders of Preferred Securities shall have no right to exercise
directly any right or remedy available to the holders of, or in respect of, the
Notes; provided, however, that if the Preferred Trustee or the Special Trustee
do not enforce such payment obligations, a Holder of Preferred Securities will,
to the fullest extent permitted by law, have the right to bring an action on
behalf of the Trust to enforce the Trust's rights under the Notes and the
Indenture.
(d) Upon the occurrence of a Change of Control Triggering
Event, each Holder of Preferred Securities shall have the right to require that
the Trust exchange Preferred Securities for Notes having an aggregate principal
amount equal to the aggregate liquidation amount of the Preferred Securities to
be exchanged. The Sponsor shall immediately redeem any Preferred Securities so
exchanged at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase.
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ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 6.1. Limitations on Voting Rights.
(a) Except as provided in this Section, in Sections 5.15, 8.10
and 10.2 and in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of an
association.
(b) Subject to the requirement of the Preferred Trustee
obtaining an Opinion of Counsel in certain circumstances set forth in the last
sentence of this paragraph, Holders of a majority in Liquidation Amount of all
Outstanding Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Preferred
Trustee (or Special Trustee, if appointed), or direct the exercise of any trust
or power conferred upon the Preferred Trustee under this Declaration including
the right to direct the Preferred Trustee, as holder of the Notes, to (i)
exercise the remedies available under the Indenture with respect to the Notes,
(ii) waive any past Event of Default that is waiveable under the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Notes shall be due and payable or (iv) consent to any amendment,
modification, or termination of the Indenture or the Notes where such consent
shall be required; provided, however, that, where a consent or action under the
Indenture would require the consent or act of the holders of more than a
majority of the aggregate principal amount of Notes affected thereby, only
Holders of the percentage of the Liquidation Amount of all Outstanding Preferred
Securities which is at least equal to the percentage required under the
Indenture may direct the Preferred Trustee to give such consent or take such
action. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of Preferred Securities, except by a
subsequent vote of the Holders of Preferred Securities. If the Preferred Trustee
or the Special Trustee fails to enforce its rights under the Notes to receive
interest or principal on the Notes on the date such interest or principal is
otherwise payable (or in the case of redemption, the redemption date), a Holder
of Preferred Securities may, to the fullest extent permitted by law, institute a
legal proceeding on behalf of the Trust against the Sponsor to enforce the
Trust's rights under the Notes without first instituting any legal proceeding
against the Preferred Trustee or any other Person. Holders of Preferred
Securities shall not be able to exercise directly any other remedies available
to the holder of the Notes unless the Preferred Trustee or the Indenture
Trustee, acting for the benefit of the Preferred Trustee, fail to do so. In such
event, Holders of at least 25% in Liquidation Amount of all Outstanding
Preferred Securities shall, to the fullest extent permitted by law, have a right
to institute such proceedings. The Preferred Trustee shall notify all Holders of
Preferred Securities of any notice of default received from the Indenture
Trustee with respect to the Notes. Such notice shall state that such Event of
Default also constitutes a Declaration Event of Default. Except with respect to
directing the time, method and place of conducting a proceeding for a remedy,
the Preferred Trustee shall not take any of the actions described in clause (i),
(ii) or (iii) above unless the Preferred Trustee has obtained an Opinion of
Counsel rendered by a law firm having a tax and securities practice to the
effect that, as a result of such action, the Trust will not fail to be
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classified as a grantor trust for United States federal income tax purposes or
another entity which is not subject to United States federal income tax at the
entity level and the assets and income of which are treated for United States
federal income tax purposes as held and derived directly by holders of interests
in the entity.
(c) In the event the consent of the Preferred Trustee, as the
holder of the Notes, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Preferred Trustee
shall request the direction of the Holders of Preferred Securities with respect
to such amendment, modification or termination and shall vote with respect to
such amendment, modification or termination as directed by a majority in
Liquidation Amount of all Outstanding Preferred Securities; provided, however,
that, where a consent under the Indenture would require the consent of the
holders of more than a majority of the aggregate principal amount of the Notes,
the Preferred Trustee may only give such consent at the direction of the Holders
of at least the same proportion in Liquidation Amount of all Outstanding
Preferred Securities. The Preferred Trustee shall not take any such action in
accordance with the directions of the Holders of Preferred Securities unless the
Preferred Trustee has obtained an Opinion of Counsel rendered by a law firm
having an independent tax and securities practice experienced in such matters to
the effect that, as a result of such action, the Trust will not fail to be
classified as a grantor trust or another entity which is not subject to United
States federal income tax at the entity level and the assets and income of which
are treated for United States federal income tax purposes as held and derived
directly by holders of interests in the entity.
(d) If any proposed amendment to the Declaration pursuant to
Section 10.2 provides for, or the Trustees or the Sponsor otherwise propose to
effect, (i) any action that would adversely affect in any material respect the
powers, preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up
or termination of the Trust, other than pursuant to the terms of this
Declaration, then the Holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of the
Holders of at least a majority in Liquidation Amount of the Trust Securities
affected thereby; provided, that if any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least a majority in Liquidation Amount of such
class of Trust Securities.
(e) Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described herein, any
of the Preferred Securities that are owned at such time by the Sponsor or any
entity directly or indirectly controlling or controlled by, or under direct or
indirect common control with, the Sponsor, shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if such
Preferred Securities were not Outstanding.
(f) Holders of Preferred Securities have no rights to appoint
or remove, or increase or decrease the number of, the Trustees, who may be
appointed, removed or replaced, increased or decreased solely by the Sponsor as
the indirect or direct Holder of all of the Common
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Securities. No vote or consent of the Holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Notes in accordance with the Declaration.
Section 6.2. Notice of Meetings.
Notice of all meetings at which the Preferred Securities
Securityholders are entitled to vote, or of all matters upon which action by
written consent of the Preferred Securities Securityholders is to be taken,
shall be given by the Preferred Trustee pursuant to Section 10.8 to each
Preferred Securities Securityholder of record, at his registered address, at
least 15 days and not more the 90 days before the meeting. Each such notice
shall include a statement setting forth the following information: (i) the date,
place and purpose of such meeting or the date by which such action is to be
taken and the purpose thereof; (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents. At any such meeting, any business properly
before the meeting may be so considered whether or not stated in the notice of
the meeting. No vote or consent of the Holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Notes in accordance with this Declaration. Any adjourned meeting may be held as
adjourned without further notice.
Section 6.3. Meetings of Preferred Securities Securityholders.
Any required approval or direction of Holders of Preferred Securities
may be given at a separate meeting of Holders of Preferred Securities convened
for such purpose, at a meeting of all of the Holders of Trust Securities or
pursuant to written consent. No annual meeting of Securityholders is required to
be held. The Company Trustees, however, shall call a meeting of Securityholders
to vote on any matter upon the written request of the Preferred Securities
Securityholders of record of 25% of the Preferred Securities (based upon their
Liquidation Amount) and the Company Trustees or the Preferred Trustee may, at
any time in their discretion, call a meeting of Preferred Securities
Securityholders to vote on any matters as to which Preferred Securities
Securityholders are entitled to vote.
Preferred Securities Securityholders of record of 50% of the
Outstanding Preferred Securities (based upon their Liquidation Amount), present
in person or by proxy, shall constitute a quorum at any meeting of
Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Preferred Securities Securityholders of record present, in person or by proxy,
holding more than a majority of the Preferred Securities (based upon their
Liquidation Amount) held by the Preferred Securities Securityholders of record
present, either in person or by proxy, at such meeting shall constitute the
action of the Securityholders, unless this Declaration requires a greater number
of affirmative votes.
Section 6.4. Voting Rights.
Securityholders shall be entitled to one vote for each $1,000.00 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
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Section 6.5. Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided, that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Company Trustees, or with such
other officer or agent of the Trust as the Company Trustees may direct, for
verification prior to the time at which such vote shall be taken. Pursuant to a
resolution of the Preferred Trustee, proxies may be solicited in the name of the
Preferred Trustee or one or more officers of the Preferred Trustee. Only
Securityholders of record shall be entitled to vote. When Trust Securities are
held jointly by several Persons, any one of them may vote at any meeting in
person or by proxy in respect of such Trust Securities, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Trust Securities. A proxy purporting to
be executed by or on behalf of a Securityholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. No proxy shall be valid more than three years
after its date of execution.
Section 6.6. Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding a majority of all Outstanding
Trust Securities (based upon their Liquidation Amount) entitled to vote in
respect of such action (or such larger proportion thereof as shall be required
by any express provision of this Declaration) shall consent to the action in
writing.
Section 6.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any distribution of the Trust Securities in respect of which a record date is
not otherwise provided for in this Declaration, or for the purpose of any other
action, the Company Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Securityholders or the payment of a
distribution or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
Section 6.8. Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Declaration to be given, made or
taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to a Company Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient
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for any purpose of this Declaration and (subject to Section 8.1) conclusive in
favor of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which any Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise between the Securityholders and the Company
Trustees or among such Securityholders or Trustees with respect to the
authenticity, validity or binding nature of any request, demand, authorization,
direction, consent, waiver or other Act of such Securityholder or Trustee under
this Article VI, then the determination of such matter by the Preferred Trustee
shall be conclusive with respect to such matter.
Section 6.9. Inspection of Records.
Upon reasonable notice to the Company Trustees and the Preferred
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1. Representations and Warranties of the Bank, the Preferred
Trustee and the Delaware Trustee.
The Preferred Trustee and the Delaware Trustee, each severally on
behalf of and only as to itself, hereby represents and warrants for the benefit
of the Sponsor, the Company Trustees and the Securityholders that:
(a) the Preferred Trustee is a Delaware banking corpor-
ation duly organized, validly existing and in good standing under the laws of
the State of Delaware;
(b) the Preferred Trustee has full corporate power, authority
and legal right to execute, deliver and perform its obligations under this
Declaration and has taken all necessary action to authorize the execution,
delivery and performance by it of this Declaration;
(c) the Delaware Trustee is a Delaware banking corpor-
ation duly organized, validly existing and in good standing in the State of
Delaware;
(d) the Delaware Trustee has full corporate power, authority
and legal right to execute, deliver and perform its obligations under this
Declaration and has taken all necessary action to authorize the execution,
delivery and performance by it of this Declaration;
(e) this Declaration has been duly authorized, executed and
delivered by the Preferred Trustee and the Delaware Trustee and constitutes the
valid and legally binding agreement of each of the Preferred Trustee and the
Delaware Trustee enforceable against each of them in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(f) the execution, delivery and performance of this
Declaration by the Preferred Trustee and the Delaware Trustee has been duly
authorized by all necessary corporate or other action on the part of the
Preferred Trustee and the Delaware Trustee and does not require any approval of
stockholders, of the Preferred Trustee or the Delaware Trustee and such
execution, delivery and performance will not (i) violate the Charter or By-Laws
of the Preferred Trustee or the Delaware Trustee, (ii) violate any provision of,
or constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of, any Lien on any properties including in
the Trust Property pursuant to the provisions of, any indenture, mortgage,
credit agreement, license or other agreement or instrument to which the
Preferred Trustee or the Delaware Trustee is a party or by which it is bound, or
(iii) violate any law, governmental rule or regulation of the United States or
the State of Delaware, as the case may be, governing the banking, trust or
general powers of the Preferred Trustee or the Delaware Trustee (as appropriate
in context) or any order, judgment or decree applicable to the Preferred Trustee
or the Delaware Trustee;
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(g) neither the authorization, execution or delivery by the
Preferred Trustee or the Delaware Trustee of this Declaration nor the
consummation of any of the transactions by the Preferred Trustee or the Delaware
Trustee (as appropriate in context) contemplated herein or therein requires the
consent or approval of, the giving of notice to, the registration with or the
taking of any other action with respect to (i) any governmental authority or
agency under any existing federal or Delaware law governing the banking, trust
or general powers of the Preferred Trustee, (ii) with respect to any
governmental authority or agency under any existing federal or Delaware law
governing the banking, trust or general powers of the Delaware Trustee (in each
case, other than (a) the qualification of this Declaration, the Indenture and
the Company Guarantee under the Trust Indenture Act, and (b) the filing of the
Certificate of Trust as required under the Delaware Business Trust Act); and
(h) there are no proceedings pending or, to the best of each
of the Preferred Trustee's and the Delaware Trustee's knowledge, threatened
against or affecting the Preferred Trustee or the Delaware Trustee in any court
or before any governmental authority, agency or arbitration board or tribunal
which, individually or in the aggregate, would materially and adversely affect
the Trust or would question the right, power and authority of the Preferred
Trustee or the Delaware Trustee, as the case may be, to enter into or perform
its obligations as one of the Trustees under this Declaration.
Section 7.2. Representations and Warranties of Sponsor.
The Sponsor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at each Time of
Delivery on behalf of the Trust have been duly authorized and will have been
duly and validly executed, issued and delivered by the Trustees pursuant to the
terms and provisions of, and in accordance with the requirements of, this
Declaration and the Securityholders will be, as of each such date, entitled to
the benefits of this Declaration; and
(b) there are no taxes, fees or other governmental charges
payable by the Trust (or the Trustees on behalf of the Trust) under the laws of
the State of Delaware or any political subdivision thereof in connection with
the execution, delivery and performance by the Preferred Trustee or the Delaware
Trustee, as the case may be, of this Declaration.
ARTICLE VIII
THE TRUSTEES
Section 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be
as provided by this Declaration and no implied covenants shall be read into this
Declaration. Notwithstanding the foregoing, no provision of this Declaration
shall require the Trustees to expend or risk their own funds or otherwise incur
any financial liability in the performance of any of their duties hereunder, or
in the exercise of any of their rights or powers, if they shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not
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reasonably assured to it. Whether or not therein expressly so provided, every
provision of this Declaration relating to the conduct or affecting the liability
of or affording protection to the Trustees shall be subject to the provisions of
this Section. The Delaware Trustee shall have no liability under this
Declaration except for its gross negligence or willful misconduct. To the extent
that, at law or in equity, a Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to the Securityholders, such
Trustee shall not be liable to the Trust or to any Securityholder for such
Trustee's good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of the Trustees otherwise existing at law or in equity, are agreed
by the Sponsor and the Securityholders to replace such other duties and
liabilities of the Trustees.
(b) All payments made by the Preferred Trustee or a Paying
Agent in respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Preferred
Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Securityholder, by its acceptance of a Trust Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in respect
of any Trust Security or for any other liability in respect of any Trust
Security. This Section 8.1(b) does not limit the liability of the Trustees
expressly set forth elsewhere in this Declaration or, in the case of the
Preferred Trustee, in the Trust Indenture Act.
(c) No provision of this Declaration shall be construed to
relieve the Preferred Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) the Preferred Trustee shall not be liable
for any error of judgment made in good faith by an authorized officer of the
Preferred Trustee, unless it shall be proved that the Preferred Trustee was
negligent in ascertaining or failing to ascertain the pertinent facts;
(ii) the Preferred Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a majority in
Liquidation Amount of the Trust Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the Preferred
Trustee, or exercising any trust or power conferred upon the Preferred Trustee
under this Declaration;
(iii) the Preferred Trustee's sole duty with
respect to the custody, safe keeping and physical preservation of the Notes and
the Payment Account shall be to deal with such Trust Property in a similar
manner as the Preferred Trustee deals with similar property for its own account,
subject to the protections and limitations on liability afforded to the
Preferred Trustee under this Declaration and the Trust Indenture Act;
(iv) the Preferred Trustee shall not be liable
for any interest on any money received by it except as it may otherwise agree
with the Sponsor; and money held by the Preferred Trustee need not be segregated
from other funds held by it except in relation to the Payment Account maintained
by the Preferred Trustee pursuant to Section 3.1 and except to the extent
otherwise required by law; and
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(v) the Preferred Trustee shall not be respon-
sible for monitoring the compliance by the Company Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the Preferred Trustee
be liable for the default or misconduct of the Company Trustees or the Sponsor.
Section 8.2. Certain Notices.
Within five Business Days after the occurrence of any Declaration Event
of Default actually known to an officer in the Corporate Trust Administration
office of the Preferred Trustee, the Preferred Trustee shall transmit, in the
manner and to the extent provided in Section 10.8, notice of such Declaration
Event of Default to the Securityholders, the Company Trustees, the Delaware
Trustee and the Sponsor, unless such Declaration Event of Default shall have
been cured or waived.
Within ninety days after the receipt of notice of the Sponsor's
exercise of its right to defer the payment of interest on the Notes pursuant to
the Indenture, the Company Trustee shall transmit, in the manner and to the
extent provided in Section 10.8, notice of such exercise to the Securityholders,
the Delaware Trustee and the Preferred Trustee, unless such exercise shall have
been revoked.
Section 8.3. Certain Rights of Preferred Trustee.
Subject to the provisions of Section 8.1:
(a) the Preferred Trustee may rely and shall be protected in
acting or refraining from acting in good faith upon any resolution, Opinion of
Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificates, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) If (i) in performing its duties under this Declaration the
Preferred Trustee is required to decide between alternative courses of action or
(ii) in construing any of the provisions of this Declaration the Preferred
Trustee finds the same ambiguous or inconsistent with any other provisions
contained herein or (iii) the Preferred Trustee is unsure of the application of
any provision of this Declaration, then, except as to any matter as to which the
Preferred Securities Securityholders are entitled to vote under the terms of
this Declaration, the Preferred Trustee shall deliver a notice to the Sponsor
requesting written instructions of the Sponsor as to the course of action to be
taken and the Preferred Trustee shall take such action, or refrain from taking
such action, as the Preferred Trustee shall be instructed in writing to take, or
to refrain from taking, by the Sponsor; provided, however, that if the Preferred
Trustee does not receive such instructions of the Sponsor within ten Business
Days after it has delivered such notice, or such reasonably shorter period of
time set forth in such notice (which to the extent practicable shall not be less
than five Business Days), it may, but shall be under no duty to, take or refrain
from taking such action not inconsistent with this Declaration as it shall deem
advisable and in the best interests of the Securityholders, in which event the
Preferred Trustee shall have no liability except for its own bad faith,
negligence or wilful misconduct;
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(c) any direction or act of the Sponsor or the Company
Trustees contemplated by this Declaration shall be sufficiently evidenced by an
Officers' Certificate;
(d) whenever in the administration of this Declaration, the
Preferred Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Preferred Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the Sponsor or the
Company Trustees;
(e) the Preferred Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or re-registration thereof;
(f) the Preferred Trustee may consult with counsel (which
counsel may be counsel to the Sponsor or any of its Affiliates, and may include
any of its employees) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon and in accordance with
such advice; the Preferred Trustee shall have the right at any time to seek
instruction concerning the administration of this Declaration from any court of
competent jurisdiction;
(g) the Preferred Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any of the Securityholders pursuant to this Declaration,
unless such Securityholders shall have offered to the Preferred Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
(h) the Preferred Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more
Securityholders;
(i) the Preferred Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys, provided, that the Preferred Trustee shall be
responsible for its own negligence or recklessness with respect to the selection
of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Declaration the
Preferred Trustee shall deem it desirable to receive instructions with respect
to enforcing any remedy or right or taking any other action hereunder the
Preferred Trustee (i) may request instructions from the Holders of the Trust
Securities which instructions may only be given by the Holders of the same
proportion in Liquidation Amount of the Trust Securities as would be entitled to
direct the Preferred Trustee under the terms of the Trust Securities in respect
of such remedy, right or action, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and
(iii) shall be protected in action in accordance with such instructions; and
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(k) except as otherwise expressly provided by this
Declaration, the Preferred Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Declaration.
No provision of this Declaration shall be deemed to impose any
duty or obligation on the Preferred Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Preferred Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Preferred Trustee
shall be construed to be a duty.
Section 8.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Sponsor of the proceeds of the Notes.
Section 8.5. May Hold Securities.
Except as provided in the definition of the term "Outstanding" in
Article I, any Trustee or any other agent of any Trustee of the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 8.8 and 8.13, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
Section 8.6. Compensation; Indemnity; Fees.
Pursuant to Section 10.18 of the Indenture, the Sponsor, in its
capacity as issuer of the Notes, agrees:
(a) to pay the Trustee from time to time reasonable
compensation for all services rendered by them hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustees upon request for all reasonable expenses, disbursements
and advances incurred or made by the Trustees in accordance with any provision
of this Declaration (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence (or, in the case of the
Delaware Trustee, gross negligence) or bad faith;
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee,
(iii) any officer, director, shareholder, employee, representative or agent of
any Trustee, and (iv) any employee or agent of the Trust or its Affiliates
(referred to herein as an "Indemnified Person") from and against any loss,
damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation, dissolution, winding-up or termination
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of the Trust or any act or omission performed or omitted by such Indemnified
Person in good faith on behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Declaration, except that no Indemnified Person shall
be entitled to be indemnified in respect of any loss, damage or claim incurred
by such Indemnified Person by reason of its negligence (or, in the case of the
Delaware Trustee and its related Indemnified Persons, gross negligence) or
willful misconduct with respect to such acts or omissions; and
(d) to the fullest extent permitted by applicable law, to
advance expenses (including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Sponsor of (i) a written affirmation by or on behalf of the Indemnified
Person of its or his good faith belief that it or he has met the standard of
conduct set forth in this Section 8.6 and (ii) an undertaking by or on behalf of
the Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified as authorized in the
preceding subsection.
The provisions of this Section 8.6 shall survive the termination of
this Declaration and of the Trust.
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.6.
The Sponsor and any Trustee (subject to Section 8.8) may engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of Trust Securities shall have no rights by
virtue of this Declaration in and to such independent ventures or the income or
profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. Neither the Sponsor, nor any Trustee, shall be obligated to present
any particular investment or other opportunity to the Trust even if such
opportunity is of a character that, if presented to the Trust, could be taken by
the Trust, and the Sponsor or any Trustee shall have the right to take for its
own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any Trustee may
engage or be interested in any financial or other transaction with the Sponsor
or any Affiliate of the Sponsor, or may act as depository for, trustee or agent
for, or act on any committee or body of holders of, securities or other
obligations of the Sponsor or its Affiliates.
Section 8.7. Corporate Preferred Trustee Required; Eligibility of
Trustees.
(a) There shall at all times be a Preferred Trustee hereunder
with respect to the Trust Securities. The Preferred Trustee shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such Person shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Preferred Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the
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provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
(b) There shall at all times be one or more Company Trustees
hereunder with respect to the Trust Securities. Each Company Trustee shall be
either a natural person who is at least 21 years of age or a legal entity that
shall act through one or more persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with
respect to the Trust Securities. The Delaware Trustee shall either be (i) a
natural person who is at least 21 years of age and a resident of the State of
Delaware or (ii) a legal entity with its principal place of business in the
State of Delaware and that otherwise meets the requirements of applicable
Delaware law that shall act through one or more persons authorized to bind such
entity.
Section 8.8. Conflicting Interests.
If the Preferred Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Preferred Trustee shall
either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and this
Declaration.
Section 8.9. Co-Trustees and Separate Trustee.
Unless a Declaration Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property may at the time be located, the Sponsor and the Company
Trustees, by agreed action of the majority of such Trustees, shall have power to
appoint, and upon the written request of the Company Trustees, the Sponsor shall
for such purpose join with the Company Trustees in the execution, delivery, and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Preferred Trustee either to act as
co-trustee, jointly with the Preferred Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Sponsor does not join in
such appointment within 15 days after the receipt by it of a request so to do,
or in case a Declaration Event of Default has occurred and is continuing, the
Preferred Trustee alone shall have power to make such appointment. Any
co-trustee or separate trustee appointed pursuant to this Section shall either
be (i) a natural person who is at least 21 years of age and a resident of the
United States or (ii) a legal entity with its principal place of business in the
United States that shall act through one or more persons authorized to bind such
entity.
Should any written instrument from the Sponsor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Sponsor.
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Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and
all rights, powers, duties, and obligations hereunder in respect of the custody
of securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder, shall be exercised,
solely by such Trustees and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby
conferred or imposed upon the Preferred Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and exercised or
performed by the Preferred Trustee or by the Preferred Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the instrument
appointing such co-trustee or separate trustee, except to the extent that under
any law of any jurisdiction in which any particular act is to be performed, the
Preferred Trustee shall be incompetent or unqualified to perform such act, in
which event such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(c) The Preferred Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Sponsor, may accept
the resignation of or remove any co-trustee or separate trustee appointed under
this Section, and, in case a Declaration Event of Default has occurred and is
continuing, the Preferred Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Sponsor. Upon the written request of the Preferred Trustee, the Sponsor
shall join with the Preferred Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Preferred Trustee or
any other trustee hereunder.
(e) The Preferred Trustee shall not be liable by reason
of any act of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Preferred Trustee
shall be deemed to have been delivered to each such co-trustee and separate
trustee.
Section 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time by giving written notice thereof to the Securityholders,
the Sponsor and the other Trustees. If the instrument of acceptance by the
successor Trustee required by Section 8.11 shall not have been delivered to the
Relevant Trustee within 30 days after the giving of such notice of
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resignation, the Relevant Trustee may petition, at the expense of the Trust, any
court of competent jurisdiction for the appointment of a successor Relevant
Trustee.
Unless a Declaration Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securities Securityholder. If a Declaration Event of Default shall have occurred
and be continuing, the Preferred Trustee or the Delaware Trustee, or both of
them, may be removed at such time by Act of the Holders of a majority in
Liquidation Amount of the Preferred Securities, delivered to the Relevant
Trustee (in its individual capacity and on behalf of the Trust). A Company
Trustee may be removed by the Common Securities Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of acting
as Trustee, or if a vacancy shall occur in the office of any Trustee for any
cause, at a time when no Declaration Event of Default shall have occurred and be
continuing, the Common Securities Securityholder, by Act of the Common
Securities Securityholder delivered to the retiring Trustee, shall promptly
appoint a successor Trustee or Trustees, and the retiring Trustee shall comply
with the applicable requirements of Section 8.11. If the Preferred Trustee or
the Delaware Trustee shall resign, be removed or become incapable of continuing
to act as the Preferred Trustee or the Delaware Trustee, as the case may be, at
a time when a Declaration Event of Default shall have occurred and be
continuing, the Preferred Securities Securityholders, by Act of the
Securityholders of a majority in Liquidation Amount of the Preferred Securities
then Outstanding delivered to the retiring Relevant Trustee, shall promptly
appoint a successor Relevant Trustee or Trustees, and such successor Trustee
shall comply with the applicable requirements of Section 8.11. If a Company
Trustee shall resign, be removed or become incapable of acting as Company
Trustee, at a time when a Declaration Event of Default shall have occurred and
be continuing, the Common Securities Securityholder by Act of the Common
Securities Securityholder delivered to the Company Trustee shall promptly
appoint a successor Company Trustee or Company Trustees and such successor
Company Trustee or Trustees shall comply with the applicable requirements of
Section 8.11. If no successor Relevant Trustee shall have been so appointed by
the Common Securities Securityholder or the Preferred Securities Securityholders
or if one has been appointed but has not accepted the appointment in the manner
required by Section 8.11, any Securityholder who has been a Securityholder of
Trust Securities for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Relevant Trustee.
The Preferred Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.8 and shall give notice to
the Sponsor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Preferred
Trustee.
Notwithstanding the foregoing or any other provision of this
Declaration, in the event any Company Trustee or a Delaware Trustee who is a
natural person dies or becomes, in the opinion of the Sponsor, incompetent or
incapacitated, the vacancy created by such death, incompetence or incapacity may
be filled by (a) the unanimous act of remaining Company Trustees if there are at
least two of them or (b) otherwise by the Sponsor (with the successor in each
case being a
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Person who satisfies the eligibility requirement for Company Trustees or
Delaware Trustee, as the case may be, set forth in Section 8.7).
Section 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with respect
to the Trust Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Declaration as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee such retiring Relevant
Trustee shall duly assign, transfer and deliver to such successor Relevant
Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
Section 8.12. Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Preferred Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
Section 8.13. Preferential Collection of Claims Against Sponsor or
Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Preferred Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or
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otherwise and irrespective of whether the Preferred Trustee shall have made any
demand on the Trust for the payment of any past due Distribution) shall be
entitled and empowered, to the fullest extent permitted by law, by intervention
in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Preferred Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Preferred Trustee, its
agent and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Preferred Trustee and, in the event the
Preferred Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Preferred Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Preferred Trustee, its
agents and counsel, and any other amounts due to the Preferred Trustee.
Nothing herein contained shall be deemed to authorize the Preferred
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or compensation affecting
the Trust Securities or the rights of any Holder thereof or to authorize the
Preferred Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 8.14. Reports by Preferred Trustee.
(a) Not later than April 15 of each year commencing with April
15, 1998, the Preferred Trustee shall transmit to all Securityholders in
accordance with Section 10.8, and to the Sponsor, a brief report dated as of the
preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in
lieu thereof, if to the best of its knowledge it has continued to be eligible
under said Section, a written statement to such effect;
(ii) a statement that the Preferred Trustee has
complied with all of its obligations under this Declaration during the
twelve-month period (or, in the case of the initial report, the period since the
Closing Date) ending with the preceding December 31 or, if the Preferred Trustee
has not complied in any material respect with such obligations, a description of
such noncompliance; and
(iii) any change in the property and funds in its
possession as Preferred Trustee since the date of its last report and any action
taken by the Preferred Trustee in the performance of its duties hereunder which
it has not previously reported and which in its opinion materially affects the
Trust Securities.
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(b) In addition the Preferred Trustee shall transmit to
Securityholders such reports concerning the Preferred Trustee and its actions
under this Declaration as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Preferred Trustee with the Commission
and with the Sponsor.
Section 8.15. Reports to the Preferred Trustee.
The Sponsor and the Company Trustees on behalf of the Trust shall
provide to the Preferred Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
Section 8.16. Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Company Trustees on behalf of the Trust
shall provide to the Preferred Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers'
Certificate.
Section 8.17. Number of Trustees.
(a) The number of Trustees shall be five, provided, that the
Holder of all of the Common Securities by written instrument may increase or
decrease the number of Company Trustees. The Preferred Trustee and the Delaware
Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Company Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul, dissolve or terminate the Trust. Whenever a vacancy in the number of
Company Trustees shall occur, until such vacancy is filled by the appointment of
a Company Trustee in accordance with Section 8.10, the Company Trustees in
office, regardless of their number (and notwithstanding any other provision of
this Agreement), shall have all the powers granted to the Company Trustees and
shall discharge all the duties imposed upon the Company Trustees by this
Declaration.
Section 8.18. Delegation of Power.
(a) Any Company Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of
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executing any documents contemplated in Section 2.7(a), including any
registration statement or amendment thereto filed with the Commission, or making
any other governmental filing; and
(b) The Company Trustees shall have power to delegate from
time to time to such of their number or to the Sponsor the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Company Trustees or otherwise as the Company Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of this Declaration, as set forth herein.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
Section 9.1. Dissolution Upon Expiration Date.
Unless earlier dissolved, the Trust shall automatically dissolve on
August 15, 2047 (the "Expiration Date"), following the distribution of the Trust
Property in accordance with Section 9.4.
Section 9.2. Early Dissolution.
The first to occur of any of the following events is an "Early
Termination Event" and will cause a dissolution of the Trust:
(a) the occurrence of a Bankruptcy Event in respect of,
or the liquidation of, the Sponsor (or, in the case of a transfer pursuant to
Section 5.14 hereof, the Holder of Common Securities);
(b) the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor (or, in the case of a transfer pursuant
to Section 5.14 hereof, the Holder of Common Securities); or the revocation of
the charter or its equivalent of the Sponsor (or, in the case of a transfer
pursuant to Section 5.14 hereof, the Holder of Common Securities) and the
expiration of 90 days after the date of revocation without a reinstatement
thereof;
(c) the entry of a decree of judicial dissolution of the
Sponsor (or, in the case of a transfer pursuant to Section 5.14 hereof, the
Holder of Common Securities) or the Trust by a court of competent jurisdiction;
(d) all of the Trust Securities shall have been called for
redemption and the Redemption Price shall have been paid to the Holders in
accordance with this Declaration;
(e) the distribution of all the Trust Property;
(f) the written direction to the Preferred Trustee from the
Sponsor at any time (which direction is optional and wholly within the
discretion of the Sponsor) to dissolve the Trust and distribute Notes to
Securityholders in exchange for the Preferred Securities;
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(g) the redemption of all of the Preferred Securities in
connection with the redemption of all of the Notes;
(h) subject to Section 9.4(e), the occurrence of a Tax
Event; and
(i) the occurrence of an Investment Company Event.
Section 9.3. Termination.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Preferred Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; and (c) the
discharge of all administrative duties of the Company Trustees, including the
performance of any tax reporting obligations with respect to the Trust or the
Securityholders.
Section 9.4. Liquidation.
(a) If an Early Termination Event specified in Section 9.2
(with the exception of clauses (d) and (g)) occurs or upon the Expiration Date,
the Trust shall be liquidated by the Preferred Trustee and the Company Trustees
as expeditiously as such Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to each Securityholder a Like Amount of Notes, subject to
Section 9.4(d). Notice of liquidation shall be given by the Preferred Trustee by
first-class mail, postage prepaid mailed not later than 30 nor more than 60 days
prior to the Liquidation Date to each Holder of Trust Securities at such
Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation
Date, the Trust Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Notes; and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities Certificates for Notes,
or if Section 9.4(d) applies receive a Liquidation Distribution, as the Company
Trustees or the Preferred Trustee shall deem appropriate.
(b) Except where Section 9.2(d), 9.2(g) or 9.4(d) applies, in
order to affect the liquidation of the Trust and distribution of the Notes to
Securityholders, the Preferred Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Notes in exchange for the Outstanding
Trust Securities Certificates.
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(c) Except where Section 9.2(d), 9.2(g) or 9.4(d) applies,
after the Liquidation Date, (i) the Trust Securities will no longer be deemed to
be Outstanding, (ii) certificates representing a Like Amount of Notes will be
issued to Holders of Trust Securities Certificates, upon surrender of such
certificates to the Company Trustees or their agent for exchange, (iii) any
Trust Securities Certificates not so surrendered for exchange will be deemed to
represent a Like Amount of Notes, accruing interest at the rate provided for in
the Notes from the last Distribution Date on which a Distribution was made on
such Trust Securities Certificates until such certificates are so surrendered
(and until such certificates are so surrendered, no payments of interest or
principal will be made to Holders of Trust Securities Certificates with respect
to such Notes) and (iv) all rights of Securityholders holding Trust Securities
will cease, except the right of such Securityholders to receive Notes upon
surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 9.4, whether because of an order for dissolution entered by a court
of competent jurisdiction or otherwise, distribution of the Notes in the manner
provided herein is determined by the Preferred Trustee not to be practical, the
Trust Property shall be liquidated, and the Trust shall be wound-up and
terminated, by the Preferred Trustee in such manner as the Preferred Trustee
determines. In such event, on the date of the winding-up and termination of the
Trust, Securityholders will be entitled to receive out of the assets of the
Trust available for distribution to Securityholders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the Liquidation Amount per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such winding-up or termination, the Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then, subject
to the next succeeding sentence, the amounts payable by the Trust on the Trust
Securities shall be paid on a pro rata basis (based upon Liquidation Amounts).
The Holder of the Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution, winding-up or termination pro rata
(determined as aforesaid) with Holders of Preferred Securities, except that, if
a Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities.
(e) If the Early Termination Event specified in Section 9.2(h)
occurs, the Trust shall be liquidated within 90 days following the occurrence of
such Tax Event as provided in this Section 9.4; provided, however, that such
liquidation and distribution shall be conditioned on (i) the Trustees' receipt
of an Opinion of Counsel of an independent tax counsel experienced in such
matters ( a "No Recognition Opinion") which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that the Holders
of the Preferred Securities will not recognize any income, gain or loss for
United States federal income tax purposes as a result of such liquidation and
distribution of Notes, and (ii) the Sponsor being unable to avoid such Tax Event
within such 90-day period by taking some ministerial action or pursuing some
other reasonable measure that will have no adverse effect on the Trust, the
Sponsor or the Holders of the Preferred Securities and will involve no material
cost. If (i) the Sponsor has received an Opinion of Counsel (a "Redemption Tax
Opinion") of an independent tax counsel or advisors experienced in such matters
that, as a result of a Tax Event, there is more than an insubstantial risk that
the Sponsor would be precluded from deducting the interest on the Notes for
United States federal income tax purposes, even after the Notes were distributed
to the Holders of the Preferred Securities upon liquidation of the Trust as
provided above, or (ii) the Trustees
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shall have been informed by such tax counsel that it cannot deliver a No
Recognition Opinion, the Sponsor has the right to redeem the Notes in whole, in
which case all the Preferred Securities and Common Securities will be entitled
to receive the Liquidation Distribution; provided, however, that, if at the time
there is available to the Company or the Trust the opportunity to eliminate,
within such ninety-day period, the Tax Event by taking some ministerial action
or pursuing some other reasonable measure that will not have an adverse effect
on the Trust, the Company or the Holders of the Preferred Securities and will
involve no material cost, the Trust or the Company will pursue such measure in
lieu of redemption.
Section 9.5. Mergers, Consolidations, Amalgamations or Replacements of
the Trust.
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person , except pursuant to this Section 9.5
or Section 9.4. At the request of the Sponsor, with the consent of the Company
Trustees and without the consent of the Holders of Preferred Securities, the
Preferred Trustee or the Delaware Trustee, the Trust may consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to, a trust organized as
such under the laws of any state of the United States of America; provided, that
(i) if the Trust is not the survivor, such successor entity either (a) expressly
assumes all of the obligations of the Trust under the Trust Securities or (b)
substitutes for the Trust Securities other securities having substantially the
same terms as the Trust Securities (the "Successor Securities") as long as the
Successor Securities rank the same as the Trust Securities with respect to
Distributions and payments upon liquidation, redemption and otherwise, (ii) the
Sponsor expressly appoints a trustee of the successor entity that possesses the
same powers and duties as the Preferred Trustee as the holder of the Notes,
(iii) the Preferred Securities or any Successor Securities are listed or traded,
or any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Trust Securities (including any Successor Securities) in any material respect,
(vi) such successor entity has a purpose substantially identical to that of the
Trust, (vii) the Sponsor has provided a guarantee to the holders of the
Successor Securities with respect to such successor entity having substantially
the same terms as the Company Guarantee, and (viii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Sponsor has received an Opinion of Counsel rendered by a law firm having a tax
and securities practice experienced in such matters to the effect that (x) such
successor entity will be treated as a grantor trust for United States federal
income tax purposes or otherwise as an entity that is not subject to United
States federal income tax at the entity level and the assets and income of which
are treated for United States federal income tax purposes as held and derived
directly by holders of interests in the entity, (y) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Sponsor nor such successor entity will be required to register as an
investment company under the 1940 Act and (z) such merger, consolidation,
amalgamation or replacement, conveyance, transfer or lease, will not adversely
affect the rights, preferences, privileges and limited liability of the
Preferred Securities in any material respect, and (ix) the Company Trustees
shall have
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furnished the Preferred Trustee and the Delaware Trustee at least five Business
Days' prior written notice of the consummation of such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease; provided, however,
that the failure to provide such notice shall not affect the validity of any
such transaction. Notwithstanding the foregoing, the Trust shall not, except
with the consent of Holders of 100% in Liquidation Amount of the Trust
Securities, consolidate, amalgamate, merge with or into, be replaced by, convey,
transfer or lease its properties and assets substantially as an entirety to any
other Person or permit any other Person to consolidate, amalgamate, merge with
or into or replace it, if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity to
be classified as other than a grantor trust for United States federal income tax
purposes or another entity which is not subject to United States federal income
tax at the entity level and the assets and income of which are treated for
United States federal income tax purposes as held and derived directly by
holders of interests in the entity.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1. Limitation of Rights of Securityholders.
The death, incapacity, bankruptcy, dissolution or termination of any
Person having an interest, beneficial or otherwise, in Trust Securities shall
not operate to terminate this Declaration, nor dissolve, terminate or annul the
Trust, nor entitle the legal representatives or heirs or successors of such
Person or any Securityholder for such Person, to claim an accounting, take any
action or bring any proceeding in any court for a partition or winding-up of the
arrangements contemplated hereby, nor otherwise affect the rights, obligations
and liabilities of the parties hereto or any of them.
Section 10.2. Amendment.
(a) This Declaration may be amended from time to time by the
Trustees and the Sponsor, without the consent of any Securityholders, (i) to
cure any ambiguity, correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to make any other provisions
with respect to matters or questions arising under this Declaration, which shall
not be inconsistent with the other provisions of this Declaration, or (ii) to
modify, eliminate or add to any provisions of this Declaration to such extent as
shall be necessary to ensure that the Trust will be classified for United States
federal income tax purposes as a grantor trust or other entity which is not
subject to United States federal income tax at the entity level and the assets
and income of which are treated for United States federal income tax purposes as
held and derived directly by holders of interests in the entity at all times
that any Trust Securities are Outstanding or to ensure that the Trust will not
be required to register as an investment company under the 1940 Act; provided,
however, that in the case of clause (i), such action shall not adversely affect
in any material respect the interests of any Securityholder, and any such
amendments of this Declaration shall become effective when notice thereof is
given to the Securityholders.
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(b) If any proposed amendment provides for, or the Trustees or
the Sponsor otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the Trust Securities,
whether by way of amendment to this Declaration or otherwise or (ii) the
dissolution, winding-up or termination of the Trust other than pursuant to the
terms of this Declaration, then the Securityholders voting together as a single
class will be entitled to vote on such amendment or proposal and such amendment
or proposal shall not be effective except with the approval of at least a
majority (based upon Liquidation Amounts) of the Trust Securities affected
thereby; provided, that if any amendment or proposal referred to in clause (i)
above would adversely affect only the Preferred Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least a majority (based on Liquidation Amounts)
of such class of Trust Securities; provided, further, that no amendment or
modification may be made to this Declaration if such amendment or modification
would (x) cause the Trust to be classified for purposes of United States federal
income taxation as other than a grantor trust or another entity which is not
subject to United States federal income tax at the entity level and the assets
and income of which are treated for United States federal income tax purposes as
held and derived directly by holders of interest in the entity, (y) reduce or
otherwise adversely affect the powers of the Trustees or (z) cause the Trust to
be deemed an investment company which is required to be registered under the
1940 Act.
(c) Except as provided in Section 10.2(b) and 10.2(d) hereof,
any provision of this Declaration may be amended by the Trustees and the Sponsor
with (i) the consent of Securityholders representing not less than a majority
(based upon Liquidation Amounts) of the Trust Securities then Outstanding and
(ii) receipt by the Trustees of an Opinion of Counsel to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the Trust's status for United States federal
income tax purposes as a grantor trust or other entity which is not subject to
United States federal income tax at the entity level and the assets and income
of which are treated for United States federal income tax purposes as held and
derived directly by holders of interests in the entity, or cause the Trust to be
deemed an investment company which is required to register under the 1940 Act.
(d) In addition to and notwithstanding any other provision in
this Declaration, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
paragraph (c) of this Section 10.2 may not be amended.
(e) Notwithstanding any other provisions of this Declaration,
no Trustee shall enter into or consent to any amendment to this Declaration
which would cause the Trust to fail or cease to qualify for the exemption from
status of an investment company under the 1940 Act or fail or cease to be
classified for purposes of United States federal income taxation as other than a
grantor trust or another entity which is not subject to United States federal
income tax at the
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entity level and the assets and income of which are treated for United States
federal income tax purposes as held and derived directly by holders of interests
in the entity.
(f) Notwithstanding anything in this Declaration to the
contrary, without the consent of the Sponsor, this Declaration may not be
amended in a manner which imposes any additional obligation on the Sponsor.
(g) In the event that any amendment to this Declaration is
made, the Company Trustees shall promptly provide to the Sponsor a copy of such
amendment.
(h) Neither the Preferred Trustee nor the Delaware Trustee
shall be required to amend this Declaration in any manner which affects its own
rights, duties or immunities under this Declaration. The Preferred Trustee and
the Delaware Trustee shall be entitled to receive an Opinion of Counsel and an
Officers' Certificate stating that any amendment to this Declaration is in
compliance with this Declaration.
Section 10.3. Separability.
In case any provision in this Declaration or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 10.4. Governing Law.
This Declaration and the rights and obligations of each of the
Securityholders, the Trust and the Trustees with respect to this Declaration and
the Trust Securities shall be construed in accordance with and governed by the
laws of the State of Delaware without giving effect to principles of conflict of
laws.
Section 10.5. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.1(a) and (e) and 4.2(d) and (e)), with the same
force and effect as though made on the date fixed for such payment, and no
interest shall accrue thereon for the period after such date.
Section 10.6. Successors.
This Declaration shall be binding upon and shall inure to the benefit
of any successor to the Sponsor, the Trust or the Relevant Trustee, including
any successor by operation of law. Except in connection with a consolidation,
merger or sale involving the Sponsor that is permitted under Article VIII of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Sponsor's obligations hereunder, the Sponsor shall not assign its obligations
hereunder.
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Section 10.7. Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Declaration.
Section 10.8. Reports, Notices and Demands.
Any report, notice, demand or other communication which by any
provision of this Declaration is required or permitted to be given or served to
or upon any Securityholder or the Sponsor may be given or served in writing by
deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
a Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Sponsor, to Symons International
Group, Inc., 4720 Kingsway Drive, Indianapolis, Indiana 46205, Attn: Chief
Executive Officer, facsimile no.: (317) 259-6395. Such notice, demand or other
communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of
this Declaration is required or permitted to be given or served to or upon the
Trust, the Preferred Trustee, the Delaware Trustee or the Company Trustees shall
be given in writing by deposit thereof, first-class postage prepaid, in the
United States mail, hand delivery or facsimile transmission, in each case,
addressed (until another address is published by the Trust) as follows: (a) with
respect to the Preferred Trustee and the Delaware Trustee to Wilmington Trust
Company, 1100 North Market Street, Rodney Square North, Wilmington, Delaware,
Attention: Corporate Trust Administration; and (b) with respect to the Company
Trustees, to them at the address above for notices to the Sponsor, marked
"Attention Company Trustees of SIG Capital Trust I." Such notice, demand or
other communication to or upon the Trust or the Preferred Trustee shall be
deemed to have been sufficiently given or made only upon actual receipt of the
writing by the Trust or the Preferred Trustee.
Section 10.9. Agreement Not to Petition.
Each of the Trustees and the Sponsor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in
the commencement of any proceeding against the Trust under any Bankruptcy Law.
In the event the Sponsor takes action in violation of this Section 10.9, the
Preferred Trustee agrees, for the benefit of Securityholders, that at the
expense of the Sponsor, it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition by the Sponsor against
the Trust or the commencement of such action and raise the defense that the
Sponsor has agreed in writing not to take such action and should be estopped and
precluded therefrom and such other defenses, if any, as counsel for the Trustee
or the Trust may assert. The provisions of this Section 10.9 shall survive the
termination of this Declaration.
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Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall, to the
extent applicable, be governed by such provisions.
(b) The Preferred Trustee shall be the only Trustee which
is a trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in this
Declaration by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Declaration modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Declaration as
so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
Section 10.11. Acceptance of Terms of Declaration, Company Guarantee
and Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS DECLARATION AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE COMPANY
GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST,
SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS
DECLARATION SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS.
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SYMONS INTERNATIONAL GROUP, INC.,
an Indiana corporation
By:__/s/ Alan G. Symons__________________
Name: Alan G. Symons
Title: Chief Executive Officer
WILMINGTON TRUST COMPANY, a Delaware
banking corporation, as Preferred Trustee
By:__/s/ Emmett Harmon___________________
Name: Emmett Harmon
Title: Vice President
WILMINGTON TRUST COMPANY, a Delaware
banking corporation, as Delaware Trustee
By:__/s/ Emmett Harmon__________________
Name: Emmett Harmon
Title: Vice President
__/s/ Alan G. Symons_____________________
Alan G. Symons, as Company Trustee
__/s/ Douglas H. Symons__________________
Douglas H. Symons, as Company Trustee
__/s/ Gary P. Hutchcraft________________
Gary P. Hutchcraft, as Company Trustee
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EXHIBIT A
CERTIFICATE OF TRUST OF SIG CAPITAL TRUST I, Trustee
This Certificate of Trust of SIG Capital Trust I (the "Trust"), dated
as of August 4, 1997, is being duly executed and filed by Wilmington Trust
Company, a Delaware banking corporation, not in its individual capacity but
solely as trustee, and Alan G. Symons, not in his individual capacity but solely
as to form a business trust under the Delaware Business Trust Act (12 Del. C.
ss. 3801 et seq.)
1. Name. The name of the business trust formed hereby is SIG
Capital Trust I.
2. Delaware Trustee. The name and business address of the
trustee of the Trust in the State of Delaware are Wilmington Trust Company, 1100
North Market Street, Rodney Square North, Wilmington, New Castle County,
Delaware 19890-0001.
3. Effective Date. This Certificate of Trust shall be effective
upon filing.
IN WITNESS WHEREOF, the undersigned, being the only trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as trustee
By:_______________________________________
Name:
Title:
------------------------------------------
Alan G. Symons, not in his individual capacity
but solely as trustee
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EXHIBIT B
The Depository Trust Company
55 Water Street, 49th Floor
New York, New York 10041-0099
Attention: Matt Whaley
General Counsel's Office
Re: SIG Capital Trust I 9 1/2% Trust Preferred Securities
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters relating to
the issuance and deposit with The Depository Trust Company ("DTC") of the SIG
Capital Trust I 9 1/2% Preferred Securities (the "Preferred Securities"), of SIG
Capital Trust I, a Delaware business trust (the "Trust"), created pursuant to a
Declaration of Trust dated as of August 4, 1997 of SIG Capital Trust I (the
"Declaration"). the payment of distributions on the Preferred Securities, to the
extent the Trust has funds legally available for the payment thereof are
guaranteed by Symons International Group, Inc. (the "Company") to the extent set
forth in a Guarantee Agreement dated August 12, 1997 by the Company with respect
to the Preferred Securities. The Company and the Trust propose to sell the
Preferred Securities to certain Initial Purchasers (the "Initial Purchasers")
pursuant to a Purchase Agreement dated August 7, 1997 by and among the Initial
Purchasers, the Trust and Symons International Group, Inc., and the Initial
Purchasers wish to take delivery of the Preferred Securities through DTC.
Wilmington Trust Company, the Preferred Trustee under the Declaration, is acting
as transfer agent and registrar with respect to the Preferred Securities (the
"Transfer Agent and Registrar").
To induce DTC to accept the Preferred Securities as eligible for
deposit at DTC, and to act in accordance with DTC's rules with respect to the
Preferred Securities, the Trust, the Transfer Agent and Registrar and DTC agree
among each other as follows:
1. Prior to the closing of the sale of the Preferred Securities to the
Initial Purchasers, which is expected to occur on or about August 12, 1997,
there shall be deposited with DTC one or more global certificates (individually
and collectively, the "Global Certificate") registered in the name of DTC's
Preferred Securities nominee, Cede & Co., representing an aggregate of 130,000
Preferred Securities and bearing the following legend:
This Preferred Security is a Global Certificate within the
meaning of the Declaration hereinafter referred to and is
registered in the name of The Depository Trust Company (the
"Depository") or a nominee of the Depository. This Preferred
Security is exchangeable for Preferred Securities registered
in the name of a person other than the Depository or its
nominee only in the limited circumstances described in the
Declaration and no transfer of this Preferred Security (other
than a transfer of this Preferred Security as a whole by the
Depository to a nominee of
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the Depository or by a nominee of the Depository to the
Depository or another nominee of the Depository) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water
Street, New York) to SIG Capital Trust I or its agent for
registration of transfer, exchange or payment, and any
Preferred Security issued is registered in the name of Cede &
Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.
2. The Declaration provides for the voting by the holders of the
Preferred Securities under certain limited circumstances. The Trust shall
establish a record date for such purposes and shall, to the extent possible,
give DTC notice of such record date not less than 15 calendar days in advance of
such record date.
3. In the event of a stock split, conversion, recapitalization,
reorganization or any other similar transaction resulting in the cancellation of
all or any part of the Preferred Securities outstanding, the Trust or the
Transfer Agent and Registrar shall send DTC a notice of such event at least 5
business days prior to the effective date of such event.
4. In the event of a distribution on, or an offering or issuance of
rights with respect to, the Preferred Securities outstanding, the Trust or the
Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount
of and conditions, if any, applicable to the payment of any such distribution or
any such offering or issuance of rights; (b) any applicable expiration or
deadline date, or any date by which any action on the part of the holders of
Preferred Securities is required; and (c) the date any required notice is to be
mailed by or on behalf of the Trust to holders of Preferred Securities or
published by or on behalf of the Trust (whether by mail or publication, the
"Publication Date"). Such notice shall be sent to DTC by a secure means (e.g.,
legible telecopy, registered or certified mail, overnight delivery) in a timely
manner designed to assure that such notice is in DTC's possession no later than
the close of business on the business day before the Publication Date. The Trust
or the Transfer Agent and Registrar will forward such notice either in a
separate secure transmission for each CUSIP number or in a secure transmission
of multiple CUSIP numbers (if applicable) that includes a manifest or list of
each CUSIP number submitted in that transmission. (The party sending such notice
shall have a method to verify subsequently the use of such means and the
timeliness of such notice.) The Publication Date shall be not less than 30
calendar days nor more than 60 calendar days prior to the payment of any such
distribution or any such offering or issuance of rights with respect to the
Preferred Securities. After establishing the amount of payment to be made on the
Preferred Securities, the Trust or the Transfer Agent and Registrar will notify
DTC's Dividend Department of such payment 5 business days prior to payment date.
Notices to DTC's Dividend Department by telecopy shall be sent to (212)
709-1723. Such notices by mail or by any other means shall be sent to:
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Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
The Trust or the Transfer Agent and Registrar shall confirm DTC's
receipt of such telecopy by telephoning the Dividend Department at (212)
709-1270.
5. In the event of a redemption by the Trust of the Preferred
Securities, notice specifying the terms of the redemption and the Publication
Date of such notice shall be sent by the Trust or the Transfer Agent and
Registrar to DTC not less than 30 calendar days prior to such event by a secure
means in the manner set forth in paragraph 4. Such redemption notice shall be
sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190,
and receipt of such notice shall be confirmed by telephoning (516) 227-4070.
Notice by mail or by any other means shall be sent to:
Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530-4719
6. In the event of any invitation to tender the Preferred Securities,
notice specifying the terms of the tender and the Publication Date of such
notice shall be sent by the Trust or the Transfer Agent and Registrar to DTC by
a secure means and in a timely manner as described in paragraph 4. Notices to
DTC pursuant to this paragraph and notices of other corporate actions (including
mandatory tenders, exchanges and capital changes) shall be sent, unless
notification to another department is expressly provided for herein, by telecopy
to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094 and
receipt of such notice shall be confirmed by telephoning (212) 709-6884, or by
mail or any other means to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
7. All notices and payment advices sent to DTC shall contain the CUSIP
number or numbers of the Preferred Securities and the accompanying designation
of the Preferred Securities, which, as of the date of this letter, is "SIG
Capital Trust I 9 1/2% Trust Preferred Securities".
8. Distribution payments or other cash payments with respect to the
Preferred Securities evidenced by the Global Certificate shall be received by
Cede & Co., as nominee of DTC, or its registered assigns in next day funds on
each payment date (or in accordance with existing arrangements between the Trust
or the Transfer Agent and Registrar and DTC). Such payments shall be made
payable to the order of Cede & Co., and shall be addressed as follows:
3
<PAGE>
NDFS Redemption Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
9. DTC may by prior written notice direct the Trust and the Transfer
Agent and Registrar to use any other telecopy number or address of DTC as the
number or address to which notices or payments may be sent.
10. In the event of a conversion, redemption, or any other similar
transaction (e.g., tender made and accepted in response to the Trust's or the
Transfer Agent and Registrar's invitation) necessitating a reduction in the
aggregate number of Preferred Securities outstanding evidenced by Global
Certificates, DTC, in its discretion: (a) may request the Trust or the Transfer
Agent and Registrar to issue and countersign a new Global Certificate; or (b)
may make an appropriate notation on the Global Certificate indicating the date
and amount of such reduction.
11. DTC may discontinue its services as a securities depositary with
respect to the Preferred Securities at any time by giving at least 90 days'
prior written notice to the Trust and the Transfer Agent and Registrar (at which
time DTC will confirm with the Trust or the Transfer Agent and Registrar the
aggregate number of Preferred Securities deposited with it) and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust may determine to make alternative arrangements for
book-entry settlement for the Preferred Securities, make available one or more
separate global certificates evidencing Preferred Securities to any Owner having
Preferred Securities credited to its DTC account, or issue definitive Preferred
Securities to the beneficial holders thereof, and in any such case, DTC agrees
to cooperate fully with the Trust and the Transfer Agent and Registrar, and to
return the Global Certificate, duly endorsed for transfer as directed by the
Trust or the Transfer Agent and Registrar, together with any other documents of
transfer reasonably requested by the Trust or the Transfer Agent and Registrar.
12. In the event that the Trust determines that beneficial owners of
Preferred Securities shall be able to obtain definitive Preferred Securities,
the Trust or the Transfer Agent and Registrar shall notify DTC of the
availability of certificates. In such event, the Trust or the Transfer Agent and
Registrar shall issue, transfer and exchange certificates in appropriate
amounts, as required by DTC and others, and DTC agrees to cooperate fully with
the Trust and the Transfer Agent and Registrar and to return the Global
Certificate, duly endorsed for transfer as directed by the Trust or the Transfer
Agent and Registrar, together with any other documents of transfer reasonably
requested by the Trust or the Transfer Agent and Registrar.
13. This letter may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Nothing herein shall be deemed to require the Transfer Agent and
Registrar to advance funds on behalf of SIG Capital Trust I.
4
<PAGE>
Very truly yours,
SIG CAPITAL TRUST I
(as Trust)
By:_______________________________________________
____________________________, Company Trustee
WILMINGTON TRUST COMPANY, a Delaware banking
association
(As Transfer Agent and Registrar and not in its
individual capacity)
By: ______________________________________________
Name:_____________________________________________
Title:____________________________________________
WILMINGTON TRUST COMPANY, a Delaware banking
association
(As Preferred Trustee and not in its individual
capacity)
By: ______________________________________________
Name:_____________________________________________
Title:____________________________________________
RECEIVED AND ACCEPTED:
THE DEPOSITORY TRUST COMPANY
By: _________________________________
Authorized Officer
5
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT AS PROVIDED IN THE DECLARATION
FORM OF COMMON SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
THE COMMON SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS COMMON SECURITY (OR ANY
PREDECESSOR OF THIS COMMON SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) SO LONG AS THIS COMMON SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE OF RULE 144A,
(D) PURSUANT TO OFFERS AND SALES TO NON-UNITED STATES PERSONS THAT OCCUR OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS COMMON SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (ii)
PURSUANT TO CLAUSE (E) TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A
LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING
MEMORANDUM DATED AUGUST 7, 1997. SUCH HOLDER FURTHER AGREES THAT
1
<PAGE>
IT WILL DELIVER TO EACH PERSON TO WHOM THIS COMMON SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
Certificate Number Number of Common Securities
C-1
Certificate Evidencing Common Securities
of
SIG Capital Trust I
9 1/2% Common Securities
(liquidation amount $1,000.00 per Common Security)
SIG Capital Trust I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that Symons
International Group, Inc. (the "Holder") is the registered owner of four
thousand one hundred and seventy-six (4,176) common securities of the Trust
representing beneficial ownership interest in the Trust and designated the 9
1/2% Common Securities (liquidation amount $1,000.00 per Common Security)(the
"Common Securities"). Except as provided in Section 5.5 of the Declaration (as
defined below) the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Declaration of Trust of SIG Capital
Trust I dated as of August 12, 1997, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of the Common
Securities as set forth therein. The Trust will furnish a copy of the
Declaration to the Holder without charge upon written request to the Trust at
its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Company Trustees of the Trust has
executed this certificate this 12th day of August, 1997.
SIG CAPITAL TRUST I
By: ______________________________________________
Name:
Title: Company Trustee
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FORM OF REVERSE OF SECURITY
Distributions payable on each Common Security will be fixed at a rate
per annum of 9 1/2% (the "Coupon Rate") of the Liquidation Amount of $1,000 per
Common Security, such rate being the rate of interest payable on the Notes to be
held by the Preferred Trustee. Distributions in arrears for more than one
semi-annual period will bear interest thereon compounded semi-annually at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions," as used herein, includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Notes held by the Preferred
Trustee and to the extent the Preferred Trustee has funds on hand legally
available therefor.
Distributions on the Common Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid from August 15, 1997 and will be payable
semi-annually in arrears on February 15 and August 15 of each year, commencing
on February 15, 1998, except as otherwise described below and in the
Declaration. Distributions will be computed on the basis of a 360-day year
constituting twelve 30- day months and, for any period of less than a full
calendar month, the number of days elapsed in such month. As long as no Event of
Default has occurred and is continuing under the Indenture, the issuer of the
Note ("Note Issuer") has the right under the Indenture to defer payments of
interest by extending the interest payment period at any time and from time to
time on the Notes for a period not exceeding 10 consecutive calendar semi-annual
periods (each an "Extension Period"), provided that no Extension Period shall
extend beyond the Maturity Date of the Notes. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, semi-annual
Distributions will continue to accumulate with interest thereon (to the extent
permitted by applicable law, but not at a rate exceeding the rate of interest
then accruing on the Notes) at the Coupon Rate compounded semi-annually during
any such Extension Period. Prior to the termination of any such Extension
Period, the Note Issuer may further defer payments of interest by further
extending such Extension Period, provided that such Extension Periods, together
with all such previous and further extensions within such Extension Period may
not exceed 10 consecutive semi-annual periods, including the first semi-annual
period during such Extension Period, or extend beyond the Maturity Date of the
Notes. Payments of Distributions that have accumulated during any Extension
Period will be payable to Holders as they appear on the books and records of the
Trust on the record date for the first scheduled Distribution payment date
following the expiration of such Extension Period. Upon the expiration of any
Extension Period and the payment of all amounts then due, the Note Issuer may
commence a new Extension Period, subject to the above requirements. Capitalized
terms used herein and not otherwise defined are used as defined in the
Declaration.
The Company Trustees shall, at the direction of the Sponsor, at any
time dissolve and liquidate the Trust and, after satisfaction of liabilities to
creditors of the Trust, cause the Notes to be distributed to the holders of the
Securities in liquidation of the Trust or simultaneously with any redemption of
the Notes, cause a Like Amount of the Securities to be redeemed by the Trust.
The Common Securities shall be redeemable as provided in the
Declaration.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Common Securities Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:_______________________
Signature:_____________________________________________________________________
(Sign exactly as your name appears on the other side of this Common Securities
Certificate)
________________________________________________________________________________
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and
credit unions with membership in an approved signature guarantee
medallion program), pursuant to S.E.C. Rule 17 Ad-15.
4
<PAGE>
[Include the following if the Common Security bears a Restricted Securities
Legend]
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:
Check one box below
(1) exchanged for the undersigned's own account without transfer;
or
(2) transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933, as amended; or
(3) transferred to an institutional "accredited investor" within
the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Securities Act of 1933, as amended, that is
acquiring the Preferred Securities for its own account, or for
the account of such an institutional "accredited investor,"
for investment purposes and not with a view to, or for offer
or sale in connection with, any distribution in violation of
the Securities Act of 1933, as amended; or
(4) transferred pursuant to another available exemption from the
registration Requirements of the Securities Act of 1933, as
amended; or
(5) transferred pursuant to an effective registration statement.
unless one of the boxes is checked, the Securities Registrar will refuse to
register any of the Common Securities evidenced by this certificate in the name
of any person other than the registered Holder thereof; provided, however, that
if box (3), (4) or (5) is checked, the Securities Registrar may require, prior
to registering any such transfer of the Common Securities such legal opinions,
certifications and other information as the trust has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, as amended, such as the exemption provided by Rule 144 under such Act;
provided, further, that (i) if box (2) is checked, the transferee must also
certify that it is a qualified institutional buyer as defined in Rule 144A or
(ii) if box (4) is checked, the transferee must also provide to the Securities
Registrar a Transferee Letter of Representation in the form attached to the
Offering Memorandum dated August 7, 1997.
Date: ____________________
Signature:__________________________________________________________________
(Sign exactly as your name appears on the other side of this Common Security)
5
<PAGE>
EXHIBIT D
FORM OF PREFERRED SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS GLOBAL SECURITY IS A GLOBAL PREFERRED SECURITY INSERT: THIS PREFERRED
SECURITY IS A GLOBAL PREFERRED SECURITY WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING AGENCY. THIS
PREFERRED SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE
BY THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF
THE CLEARING AGENCY TO ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED
EXCEPT IN LIMITED CIRCUMSTANCES.]
[IF THIS GLOBAL SECURITY IS A RESTRICTED GLOBAL SECURITY INSERT: UNLESS THIS
PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, ANY PREFERRED
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE PREFERRED SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS PREFERRED
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS PREFERRED SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS PREFERRED SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF
THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS PREFERRED SECURITY (OR ANY
1
<PAGE>
PREDECESSOR OF THIS PREFERRED SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) SO LONG AS THIS PREFERRED SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NONUNITED STATES PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THIS PREFERRED SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE
RIGHT OF THE TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM
AND (ii) PURSUANT TO CLAUSE (E) TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE
TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE
OFFERING MEMORANDUM DATED AUGUST 7, 1997. SUCH HOLDER FURTHER AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS PREFERRED SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
[IF THIS GLOBAL SECURITY IS A REGULATION S GLOBAL SECURITY, INSERT: THIS
PREFERRED SECURITY HAS NOT BEEN 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, UNITED STATES PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS
AVAILABLE.]
2
<PAGE>
Certificate Number Number of Preferred Securities
CUSIP NO.
Certificate Evidencing Preferred Securities
of
SIG Capital Trust I
9 1/2% Trust Preferred Securities
(liquidation amount $1,000.00 per Preferred Security)
SIG Capital Trust I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that _______ (the
"Holder") is the registered owner of ___( ) preferred securities of the Trust
representing an undivided beneficial ownership interest in the assets of the
Trust and designated the SIG Capital Trust I 9 1/2% Trust Preferred Securities
(liquidation amount $1,000.00 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in the
Declaration (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred Securities
represented hereby are issued and shall in all respects be subject to the terms
and provision of, the Amended and Restated Declaration of Trust of SIG Capital
Trust I dated as of August 12, 1997, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of Preferred
Securities as set forth therein. The Holder including the designation of the
terms of Preferred Securities as set forth therein. The Holder is entitled to
the benefits of the Guarantee Agreement entered into by Symons International
Group, Inc., an Indiana corporation, and Wilmington Trust Company, as guarantee
trustee, dated as of August 12, 1997, (the "Company Guarantee"), to the extent
provided therein. The Trust will furnish a copy of the Declaration and the
Company Guarantee to the Holder without charge upon written request to the Trust
at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
3
<PAGE>
IN WITNESS WHEREOF, one of the Company Trustees of the Trust has
executed this certificate this 12th day of August, 1997.
SIG CAPITAL TRUST I
By:______________________________________________
Name:
Title: Company Trustee
PREFERRED TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated WILMINGTON TRUST COMPANY,
as Preferred Trustee
By:______________________________________________
Authorized Signatory
4
<PAGE>
FORM OF REVERSE SECURITY
Distributions payable on each Preferred Security will be fixed at a
rate per annum of 9 1/2% (the "Coupon Rate") of the Liquidation Amount of $1,000
per Preferred Security, such rate being the rate of interest payable on the
Notes to be held by the Preferred Trustee. Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). The term
"Distributions," as used herein, includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Notes held by the Preferred
Trustee and to the extent that the payments are made in respect of the Notes
held by the Preferred Trustee and to the extent the Preferred Trustee has funds
on hand legally available therefor.
Distributions on the Preferred Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid from August 15, 1997 and will be payable
semi-annually in arrears on February 15 and August 15 of each year, commencing
on February 15, 1998, except as otherwise described below and in the
Declaration. Distributions will be computed on the basis of a 360-day year
consisting of twelve 30-day months and, for any period of less than a full
calendar month, the number of days elapsed in such month. As long as no Event of
Default has occurred and is continuing under the Indenture, the issuer of the
Note ("Note Issuer") has the right under the Indenture to defer payments of
interest by extending the interest payment period at any time and from time to
time on the Notes for a period not exceeding 10 consecutive calendar semi-annual
periods (each an "Extension Period"), provided that no Extension Period shall
extend beyond the Maturity Date of the Notes. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, semi-annual
Distributions will continue to accumulate with interest thereon (to the extent
permitted by applicable law, but not at a rate exceeding the rate of interest
then accruing on the Notes) at the Coupon Rate compounded semi-annually during
any such Extension Period. Prior to the termination of any such Extension
Period, the Note Issuer may further defer payments of interest by further
extending such Extension Period; provided that such Extension Periods, together
with all such previous and further extensions within such Extension Period may
not exceed 10 consecutive semi-annual periods, including the first semi-annual
period during such Extension Period, or extend beyond the Maturity Date of the
Notes. Payments of Distributions that have accumulated during any Extension
Period will be payable to Holders as they appear on the books and records of the
Trust on the record date for the first scheduled Distribution payment date
following the expiration of such Extension Period. Upon the expiration of any
Extension Period and the payment of all amounts then due, the Note Issuer may
commence a new Extension Period, subject to the above requirements. Capitalized
terms used herein and not otherwise defined are used as defined in the
Declaration.
The Company Trustees shall, at the direction of the Sponsor, at any
time dissolve and liquidate the Trust and, after satisfaction of liabilities to
creditors of the Trust, cause the Notes to be distributed to the holders of the
Securities in liquidation of the Trust or simultaneously with any redemption of
the Notes, cause a Like Amount of the Securities to be redeemed by the Trust.
The Preferred Securities shall be redeemable as provided in the
Declaration.
5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Preferred Securities Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:_______________________
Signature:_____________________________________________________________________
(Sign exactly as your name appears on the other side of this Preferred
Securities Certificate)
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and
credit unions with membership in an approved signature guarantee
medallion program), pursuant to S.E.C. Rule 17 Ad-15.
6
<PAGE>
[Include the following if the Preferred Security bears a Restricted Securities
Legend]
In connection with any transfer of any of the Preferred Securities evidenced by
this certificate, the undersigned confirms that such Preferred Securities are
being:
Check one box below
(1) exchanged for the undersigned's own account without transfer,
or
(2) transferred pursuant to and in compliance with Rule 144A under
the Securities Act Of 1933, as amended; or
(3) transferred to an institutional "accredited investor" within
the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Securities Act of 1933, as amended, that is
acquiring the Preferred Securities for its own account, or for
the account of such an institutional "accredited investor,"
for investment purposes and not with a view to, or for offer
or sale in connection with, any distribution in violation of
the Securities Act of 1933, as amended; or
(4) transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933, as
amended; or
(5) transferred pursuant to an effective registration statement.
unless one of the boxes is checked, the Securities Registrar will refuse to
register any of the Preferred Securities evidenced by this certificate in the
name of any person other than the registered Holder thereof; provided, however,
that if box (3), (4) or (5) is checked, the Securities Registrar may require,
prior to registering any such transfer of the Preferred Securities such legal
opinions, certifications and other information as the trust has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended, such as the exemption provided by Rule 144
under such Act; provided, further, that (i) if box (2) is checked, the
transferee must also certify that it is a qualified institutional buyer as
defined in Rule 144A or (ii) if box (4) is checked, the transferee must also
provide to the Securities Registrar a Transferee Letter of Representation in the
form attached to the Offering Memorandum dated August 7, 1997.
Date:___________________
Signature:______________________________________________________________________
(Sign exactly as your name appears on the other side of this Preferred Security)
7
Exhibit 4.5
FORM OF PREFERRED SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS GLOBAL SECURITY IS A GLOBAL PREFERRED SECURITY INSERT: THIS PREFERRED
SECURITY IS A GLOBAL PREFERRED SECURITY WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING AGENCY. THIS
PREFERRED SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED SECURITY AS A WHOLE
BY THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF
THE CLEARING AGENCY TO ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED
EXCEPT IN LIMITED CIRCUMSTANCES.]
[IF THIS GLOBAL SECURITY IS A RESTRICTED GLOBAL SECURITY INSERT: UNLESS THIS
PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, ANY PREFERRED
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE PREFERRED SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS PREFERRED
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS PREFERRED SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS PREFERRED SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF
THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS PREFERRED SECURITY (OR ANY
PREDECESSOR OF THIS PREFERRED SECURITY) ONLY (A) TO THE COMPANY,
<PAGE>
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) SO LONG AS THIS PREFERRED SECURITY IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-UNITED STATES
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS PREFERRED SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM AND (ii) PURSUANT TO CLAUSE (E) TO REQUIRE THAT THE TRANSFEROR DELIVER
TO THE TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A
TO THE OFFERING MEMORANDUM DATED AUGUST 7, 1997. SUCH HOLDER FURTHER AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS PREFERRED SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
[IF THIS GLOBAL SECURITY IS A REGULATION S GLOBAL SECURITY, INSERT: THIS
PREFERRED SECURITY HAS NOT BEEN 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, UNITED STATES PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS
AVAILABLE.]
<PAGE>
Certificate Number Number of Preferred Securities
CUSIP NO.
Certificate Evidencing Preferred Securities
of
SIG Capital Trust I
9 1/2% Trust Preferred Securities
(liquidation amount $1,000.00 per Preferred Security)
SIG Capital Trust I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that _______ (the
"Holder") is the registered owner of ___( ) preferred securities of the Trust
representing an undivided beneficial ownership interest in the assets of the
Trust and designated the SIG Capital Trust I 9 1/2% Trust Preferred Securities
(liquidation amount $1,000.00 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in the
Declaration (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred Securities
represented hereby are issued and shall in all respects be subject to the terms
and provision of, the Amended and Restated Declaration of Trust of SIG Capital
Trust I dated as of August 12, 1997, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of Preferred
Securities as set forth therein. The Holder including the designation of the
terms of Preferred Securities as set forth therein. The Holder is entitled to
the benefits of the Guarantee Agreement entered into by Symons International
Group, Inc., an Indiana corporation, and Wilmington Trust Company, as guarantee
trustee, dated as of August 12, 1997, (the "Company Guarantee"), to the extent
provided therein. The Trust will furnish a copy of the Declaration and the
Company Guarantee to the Holder without charge upon written request to the Trust
at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
<PAGE>
IN WITNESS WHEREOF, one of the Company Trustees of the Trust has
executed this certificate this 12th day of August, 1997.
SIG CAPITAL TRUST I
By: _____________________________________________
Name:
Title: Company Trustee
PREFERRED TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated:__________________ WILMINGTON TRUST COMPANY,
as Preferred Trustee
By:______________________________________________
Authorized Signatory
Exhibit 4.6
================================================================================
EXCHANGE GUARANTEE AGREEMENT
between
Symons International Group, Inc.
(as Exchange Guarantor)
and
Wilmington Trust Company
(as Trustee)
dated as of
____________, 1997
================================================================================
<PAGE>
CROSS REFERENCE TABLE*
Section of Section of
Trust Indenture Act Exchange Guarantee
of 1939, as Amended Agreement
310(a).......................................................4.1(a)
310(b).......................................................4.1(c), 2.B
310(c).......................................................Inapplicable
311(a).......................................................2.2(b)
311(b).......................................................2.2(b)
311(c).......................................................Inapplicable
312(a).......................................................2.2(a)
312(b).......................................................2.2(b)
313..........................................................2.3
314(a).......................................................2.4
314(b).......................................................Inapplicable
314(c).......................................................2.5
314(d).......................................................Inapplicable
314(e).......................................................1.1, 2.5, 3.2
314(f).......................................................2.1, 3.2
315(a).......................................................3.1(d)
315(b).......................................................2.7
315(c).......................................................3.1
315(d).......................................................3.1(d)
316(a).......................................................1.1, 2.6, 5.4
316(b).......................................................5.3
316(c).......................................................8.2
317(a).......................................................Inapplicable
317(b).......................................................Inapplicable
318(a).......................................................2.1(b)
318(b).......................................................2.1
318(c).......................................................2.1(a)
- --------
* This Cross-Reference Table does not constitute part of the Exchange
Guarantee Agreement and shall not affect the interpretation of any of
its terms or provisions.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS....................................... 2
SECTION 1.1. Definitions.................................................. 2
ARTICLE II. TRUST INDENTURE ACT............................. 4
SECTION 2.1. Trust Indenture Act; Application............................. 4
SECTION 2.2. List of Holders.............................................. 4
SECTION 2.3. Reports by the Exchange Guarantee Trustee.................... 5
SECTION 2.4. Periodic Reports to the Exchange Guarantee Trustee........... 5
SECTION 2.5. Evidence of Compliance with Condition Precedent.............. 5
SECTION 2.6. Events of Default; Waiver.................................... 5
SECTION 2.7. Event of Default; Notice..................................... 5
SECTION 2.8. Conflicting Interests........................................ 6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE EXCHANGE
GUARANTEE TRUSTEE............................................ 6
SECTION 3.1. Powers and Duties of the Exchange Guarantee Trustee.......... 6
SECTION 3.2. Certain Rights of Exchange Guarantee Trustee................. 8
SECTION 3.3. Indemnity.................................................... 9
ARTICLE IV. EXCHANGE GUARANTEE TRUSTEE...................... 10
SECTION 4.1. Exchange Guarantee Trustee; Eligibility...................... 10
SECTION 4.2. Appointment, Removal and Resignation of the Exchange
Guarantee Trustee........................................... 10
ARTICLE V. GUARANTEE........................................ 11
SECTION 5.1. Exchange Guarantee........................................... 11
SECTION 5.2. Waiver of Notice and Demand.................................. 11
SECTION 5.3. Obligations Not Affected..................................... 11
SECTION 5.4. Rights of Holders............................................ 12
SECTION 5.5. Guarantee of Payment......................................... 13
SECTION 5.6. Subrogation.................................................. 13
SECTION 5.7. Independent Obligations...................................... 13
ARTICLE VI. SUBORDINATION................................... 13
SECTION 6.1. Subordination................................................ 13
ARTICLE VII. TERMINATION.................................... 15
SECTION 7.1. Termination.................................................. 15
i
<PAGE>
ARTICLE VIII. MISCELLANEOUS................................. 15
SECTION 8.1. Successors and Assigns....................................... 15
SECTION 8.2. Amendments................................................... 15
SECTION 8.3. Notices...................................................... 16
SECTION 8.4. Benefit...................................................... 17
SECTION 8.5. Interpretation............................................... 17
SECTION 8.6. Governing Law................................................ 17
ii
<PAGE>
EXCHANGE GUARANTEE AGREEMENT
This EXCHANGE GUARANTEE AGREEMENT, dated as of ____________, 1997, is
executed and delivered by Symons International Group, Inc., a corporation
organized under the laws of the State of Indiana ("Exchange Guarantor"), having
its principal office at 4720 Kingsway Drive, Indianapolis, Indiana, 46205, and
Wilmington Trust Company, a Delaware banking corporation duly organized and
existing under the laws of the State of Delaware, as trustee (the "Exchange
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Exchange Preferred Securities (as defined herein) of SIG
Capital Trust I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to the terms of an Amended and Restated Declaration
of Trust dated as of August 12, 1997 (the "Declaration"), among the trustees of
Issuer, the Exchange Guarantor, as sponsor, and the holders from time to time of
undisclosed beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof 35,000 Exchange Preferred Securities having an
aggregate liquidation amount of $135,000,000, such Exchange Preferred
Securitiesbeing designated as 9 1/2% Exchange Preferred Securities (and being
herein referred to as the "Exchange Preferred Securities") in connection with
the consummation of the Exchange Offer (as defined in the Declaration);
WHEREAS, as incentive for the Holders of Preferred Securities issued on
August 12, 1997 to exchange the Preferred Securities for Exchange Preferred
Securities in the Exchange Offer, the Exchange Guarantor desires irrevocably and
unconditionally to guarantee, to the extent set forth herein, payment to the
Holders of the Exchange Preferred Securities the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the exchange by each Holder of
Exchange Preferred Securities, which exchange the Exchange Guarantor hereby
shall benefit the Exchange Guarantor, the Exchange Guarantor executes and
delivers this Exchange Guarantee Agreement for the benefit of the Holders from
time to time of the Exchange Preferred Securities.
ARTICLE I. DEFINITIONS
SECTION 1.1. Definitions.
As used in this Exchange Guarantee Agreement, the terms set forth below
shall, unless the context otherwise requires, have the following meanings.
Capitalized or otherwise defined terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Declaration as in effect
on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct common control with such
specified Person; provided, however, that an Affiliate of the Exchange Guarantor
shall not be deemed to include the Issuer. For the purposes of this defini-
tion, "control" when used with respect to
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any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Common Security" means an undivided beneficial interest in the assets
of the Issuer, having a Liquidation Amount (as defined in the Declaration) of
$1,000 and having the rights provided therefor in the Declaration, including the
right to receive Distributions and a Liquidation Distribution as provided
therein.
"Event of Default" means a default by the Exchange Guarantor on any of
its payment obligations under this Exchange Guarantee Agreement.
"Exchange Guarantee Trustee" means Wilmington Trust Company, until a
Successor Exchange Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Exchange Guarantee Agreement and
thereafter means each such Successor Exchange Guarantee Trustee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Exchange Preferred Securities, to the
extent not paid or made by or on behalf of the Issuer: (i) any accumulated and
unpaid Distributions required to be paid on the Exchange Preferred Securities,
to the extent the Issuer has funds legally available therefor, (ii) the
Redemption Price with respect to the Exchange Preferred Securities called for
redemption, to the extent the Issuer has funds legally available therefor and
(iii) upon a voluntary or involuntary dissolution, winding up or liquidation of
the Issuer (unless the Exchange Notes are distributed to the Holders of the
Exchange Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on the Exchange
Preferred Securities to the date of payment, to the extent the Issuer has funds
legally available therefor and (b) the amount of cash assets of the Issuer
remaining legally available for distribution to Holders of the Exchange
Preferred Securities upon liquidation of the Issuer.
"Holder" means any holder, as registered on the books and records of
the Issuer, of any Exchange Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Exchange
Preferred Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, "Holder" shall not include the Exchange
Guarantor, any Trustee, or any Affiliate of the Exchange Guarantor or of any
Trustee.
"Indenture" means the Senior Subordinated Indenture dated as of August
12, 1997, among the Exchange Guarantor and Wilmington Trust Company, as trustee.
"List of Holders" has the meaning specified in Section 2.2(a).
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"Majority in liquidation amount of the Securities" means, except as
provided by the Trust Indenture Act, a vote by the Holder(s), voting separately
as a class, of more than 50% of the liquidation amount of all then outstanding
Exchange Preferred Securities issued by the Issuer.
"Officers' Certificate" means a certificate signed by (a) the Chairman
and Chief Executive Officer, President or Vice President, and by the Treasurer,
an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary,
or (b) any two members of the Board of Directors of the Company, and delivered
to the appropriate Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Exchange Guarantee
Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each officer, such
condition or covenant has been complied with.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, or government or any agency, instrumentality or
political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Exchange Guarantee
Trustee, any Senior Vice President, any Vice President, any Assistant Vice
President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant
Treasurer, any Trust Officer or Assistant Trust Officer or any other officer of
the Corporate Trust Department of the above-designated officers and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of that officer's knowledge of and familiarity
with the particular subject.
"Senior Indebtedness" has the meaning specified in the Indenture.
"Successor Exchange Guarantee Trustee" means a successor Exchange
Guarantee Trustee possessing the qualifications to act as Exchange Guarantee
Trustee under Section 4.1.
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"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
(a) This Exchange Guarantee Agreement is subject to the provisions of
the Trust Indenture Act that are required to be part of this Exchange Guarantee
Agreement and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Exchange Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2. List of Holders.
(a) The Exchange Guarantor shall furnish or cause to be furnished to
the Exchange Guarantee Trustee (a) semiannually, on or before February 15 and
August 15 of each year, a list, in such form as the Exchange Guarantee Trustee
may reasonably require, of the names and addresses of the Holders ("List of
Holders") as of a date not more than 15 days prior to the delivery thereof, and
(b) at such other times as the Exchange Guarantee Trustee may request in
writing, within 30 days after the receipt by the Exchange Guarantor of any such
request, a List of Holders as of a date not more than 15 days prior to the time
such list is furnished, in each case to the extent such information is in the
possession or control of the Exchange Guarantor and is not identical to a
previously supplied list of Holders or has not otherwise been received by the
Exchange Guarantee Trustee in its capacity as such. The Exchange Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The Exchange Guarantee Trustee shall comply with its obligations
under Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.3. Reports by the Exchange Guarantee Trustee.
Not later than April 30 of each year, commencing April 30, 1998, the
Exchange Guarantee Trustee shall provide to the Holders such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Exchange
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4. Periodic Reports to the Exchange Guarantee Trustee.
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The Exchange Guarantor shall provide to the Exchange Guarantee Trustee,
the Securities and Exchange Commission and the Holders such documents, reports
and information, if any, as required by Section 314 of the Trust Indenture Act
and the compliance certificate required by Section 314 of the Trust Indenture
Act, in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.
SECTION 2.5. Evidence of Compliance with Condition Precedent.
The Exchange Guarantor shall provide to the Exchange Guarantee Trustee
such evidence of compliance with such conditions precedent, if any, provided for
in this Exchange Guarantee Agreement that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c) (1) may be given
in the form of an Officers' Certificate.
SECTION 2.6. Events of Default; Waiver.
The Holders of a Majority in liquidation amount of the Securities may,
by vote, on behalf of the Holders, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Exchange Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent therefrom.
SECTION 2.7. Event of Default; Notice.
(a) The Exchange Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default known to the Exchange
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice, provided, that, except in the case of a default in the payment of a
Guarantee Payment, the Exchange Guarantee Trustee shall be protected in
withholding such notice if and so long as the Board of Directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Exchange Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders.
(b) The Exchange Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Exchange Guarantee Trustee shall
have received written notice, or a Responsible Officer charged with the
administration of the Declaration shall have obtained written notice, of such
Event of Default.
SECTION 2.8. Conflicting Interests.
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The Declaration shall be deemed to be specifically described in this
Exchange Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE EXCHANGE GUARANTEE
TRUSTEE
SECTION 3.1. Powers and Duties of the Exchange Guarantee Trustee.
(a) This Exchange Guarantee Agreement shall be held by the Exchange
Guarantee Trustee for the benefit of the Holders, and the Exchange Guarantee
Trustee shall not transfer this Exchange Guarantee Agreement to any Person
except a Holder exercising his or her rights pursuant to Section 5.4 (iv) or to
a Successor Exchange Guarantee Trustee on acceptance by such Successor Exchange
Guarantee Trustee of its appointment to act as Successor Exchange Guarantee
Trustee. The right, title and interest of the Exchange Guarantee Trustee shall
automatically vest in any Successor Exchange Guarantee Trustee, upon acceptance
by such Successor Exchange Guarantee Trustee of its appointment hereunder, and
such vesting and cessation of title shall be effective whether conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Exchange Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the Exchange
Guarantee Trustee shall enforce this Exchange Guarantee Agreement for the
benefit of the Holders.
(c) The Exchange Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Exchange Guarantee Agreement, and no implied covenants shall be read into
this Exchange Guarantee Agreement against the Exchange Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6), the Exchange Guarantee Trustee shall exercise such of
the rights and powers vested in it by this Exchange Guarantee Agreement, and use
the same degree of care and skill in its exercise thereof, as a prudent person
would exercise or use under the circumstance in the conduct of his or her own
affairs.
(d) No provision of this Exchange Guarantee Agreement shall be
construed to relieve the Exchange Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Exchange
Guarantee Trustee shall be determined solely by the express
provisions of this Exchange Guarantee Agreement, and the
Exchange Guarantee Trustee shall not be liable
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except for the performance of such duties and obligations as
are specifically set forth in this Exchange Guarantee
Agreement; and
(B) in the absence of bad faith on the part of the
Exchange Guarantee Trustee, the Exchange Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Exchange Guarantee
Trustee and conforming to the requirements of this Exchange
Guarantee Agreement; but in the case of any such certificates
or opinions that by any provision hereof or of the Trust
Indenture Act are specifically required to be furnished to the
Exchange Guarantee Trustee, the Exchange Guarantee Trustee
shall be under a duty to examine the same to determine whether
they conform to the requirements of this Exchange Guarantee
Agreement;
(ii) the Exchange Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Exchange Guarantee Trustee, unless it shall be proved that the
Exchange Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made;
(iii) the Exchange Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the holders of not less than a
Majority in liquidation amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Exchange Guarantee Trustee, or exercising any trust or power
conferred upon the Exchange Guarantee Trustee under this Exchange
Guarantee Agreement; and
(iv) no provision of this Exchange Guarantee Agreement shall
require the Exchange Guarantee Trustee to expend or risk his own funds
or otherwise incur personal financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers, if
the Exchange Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Exchange Guarantee
Agreement or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.2. Certain Rights of Exchange Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Exchange Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, or other evidence of
indebtedness or other paper or document
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reasonably believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(ii) any direction or act of the Exchange Guarantor
contemplated by this Exchange Guarantee Agreement shall be sufficiently
evidenced by an Officers' Certificate unless otherwise prescribed
herein.
(iii) Whenever, in the administration of this Exchange
Guarantee Agreement, the Exchange Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting to take any action hereunder, the Exchange
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon receipt of such request
from the Exchange Guarantee Trustee, shall be promptly delivered by the
Exchange Guarantor.
(iv) The Exchange Guarantee Trustee may consult with legal
counsel, and the written advice or opinion of such legal counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be
taken by it hereunder in good faith and in accordance with such advice
or opinion. Such legal counsel may be legal counsel to the Exchange
Guarantor or any of its Affiliates and may be one of its employees. The
Exchange Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Exchange Guarantee
Agreement from any court of competent jurisdiction.
(v) The Exchange Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Exchange Guarantee Agreement at the request or direction of any Holder,
unless such Holder shall have provided to the Exchange Guarantee
Trustee such adequate security and indemnity as would satisfy a
reasonable person in the position of the Exchange Guarantee Trustee,
against the costs, expenses (including attorneys' fees and expenses)
and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Exchange Guarantee Trustee; provided that, nothing
contained in this Section 3.2(a) (v) shall be taken to relieve the
Exchange Guarantee Trustee, upon the occurrence of an Event of Default,
of its obligation to exercise the rights and powers vested in it by
this Exchange Guarantee Agreement.
(vi) The Exchange Guarantee Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Exchange Guarantee
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
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(vii) The Exchange Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through its agents or attorneys, and the Exchange
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney appointed with due
care by it hereunder.
(viii) Whenever in the administration of this Exchange
Guarantee Agreement the Exchange Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or take any other action hereunder, the Exchange Guarantee
Trustee (A) may request instructions from the Holders, (B) may refrain
from enforcing such remedy or right or taking such other action until
such instructions are received, and (C) shall be protected in acting in
accordance with such instructions.
(b) No provision of this Exchange Guarantee Agreement shall be deemed
to impose any duty or obligation on the Exchange Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Exchange Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Exchange Guarantee Trustee shall be construed to be a duty to act in
accordance with such power and authority.
SECTION 3.3. Indemnity.
The Exchange Guarantor agrees to indemnify the Exchange Guarantee
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Exchange Guarantee
Trustee, arising out of or in connection with the acceptance or administration
of this Exchange Guarantee Agreement, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder (including the fees of
counsel, provided that the selection of such counsel will be subject to the
consent of the Exchange Guarantor, which consent shall not be unreasonably
withheld). The Exchange Guarantee Trustee will not claim or exact any lien or
charge on any Guarantee Payments as a result of any amount due to it under this
Exchange Guarantee Agreement.
ARTICLE IV. EXCHANGE GUARANTEE TRUSTEE
SECTION 4.1. Exchange Guarantee Trustee; Eligibility.
(a) There shall at all times be a Exchange Guarantee Trustee which
shall:
(i) not be an Affiliate of the Exchange Guarantor; and
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(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least $50,000,000, and shall be a corporation meeting the
requirements of Section 310(c) of the Trust Indenture Act. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining
authority, then, for the purposes of this Section and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Exchange Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(e), the Exchange Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Exchange Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Exchange Guarantee Trustee and Exchange Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2. Appointment, Removal and Resignation of the Exchange
Guarantee Trustee.
(a) Subject to Section 4.2(b), the Exchange Guarantee Trustee may be
appointed or removed without cause at any time by the Exchange Guarantor.
(b) The Exchange Guarantee Trustee shall not be removed until a
Successor Exchange Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Exchange Guarantee
Trustee and delivered to the Exchange Guarantor.
(c) The Exchange Guarantee Trustee appointed hereunder shall hold
office until a Successor Exchange Guarantee Trustee shall have been appointed or
until its removal or resignation. The Exchange Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Exchange Guarantee Trustee and delivered to the Exchange
Guarantor, which resignation shall not take effect until a Successor Exchange
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Exchange Guarantee Trustee and
delivered to the Exchange Guarantor and the resigning Exchange Guarantee
Trustee.
(d) If no Successor Exchange Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Exchange Guarantor of an instrument of resignation,
the resigning Exchange Guarantee
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Trustee may petition, at the expense of the Exchange Guarantor, any court of
competent jurisdiction for appointment of a Successor Exchange Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Exchange Guarantee Trustee.
ARTICLE V. GUARANTEE
SECTION 5.1. Exchange Guarantee.
The Exchange Guarantor irrevocably and unconditionally agrees to pay in
full or a senior subordinated basis, to the extent set forth herein, to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by or on behalf of the Issuer), as and when due, regardless of any defense,
right of setoff or counterclaim which the Issuer may have or assert, other than
the defense of payment. The Exchange Guarantor's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Exchange Guarantor to the Holders or by causing the Issuer to pay such amounts
to the Holders.
SECTION 5.2. Waiver of Notice and Demand.
The Exchange Guarantor hereby waives notice of acceptance of the
Exchange Guarantee Agreement and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Exchange Guarantee Trustee, Issuer or any other Person before
proceeding against the Exchange Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices an demands.
SECTION 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Exchange
Guarantor under this Exchange Guarantee Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Exchange Preferred Securities to be
performed or observed by the Trust;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Exchange Preferred Securities or the
extension of time for the performance of any other obligation under, arising out
of, or in connection with, the Exchange Preferred Securities;
(c) any failure, omission, delay or lack of diligence on. the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders
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pursuant to the terms of the Exchange Preferred Securities, or any action
on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization., arrangement, composition or readjustment of debt of,
or other similar proceedings affecting the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Exchange
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Exchange Guarantor hereunder shall
be absolute and unconditional under any and all circumstances. There shall be no
obligation of the Holders to give notice to, or obtain the consent of, the
Exchange Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4. Rights of Holders.
The Exchange Guarantor expressly acknowledges that: (i) this Exchange
Guarantee Agreement will be deposited with the Exchange Guarantee Trustee to be
held for the benefit of the Holders; (ii) the Exchange Guarantee Trustee has the
right to enforce this Exchange Guarantee Agreement on behalf of the Holders;
(iii) the Holders of a Majority in liquidation amount of the Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Exchange Guarantee Trustee in respect of this Exchange
Guarantee Agreement or exercising any trust or power conferred upon the Exchange
Guarantee Trustee under this Exchange Guarantee Agreement; and (iv) upon the
occurrence of an Event of Default, any Holder may institute a legal proceeding
directly against the Exchange Guarantor to enforce its rights under this
Exchange Guarantee Agreement, without first instituting a legal proceeding
against the Exchange Guarantee Trustee, the Issuer or any other Person.
SECTION 5.5. Guarantee of Payment.
This Exchange Guarantee Agreement creates a guarantee of payment and
not of collection. This Exchange Guarantee Agreement will not be discharged
except by payment of the Guarantee Payments in full (without duplication of
amounts theretofore paid by the Issuer out of funds legally available therefor)
or upon distribution of Notes to Holders as provided in the Declaration.
SECTION 5.6. Subrogation.
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The Exchange Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to the Holders by
the Exchange Guarantor under this Exchange Guarantee Agreement and shall have
the right to waive payment by the Issuer pursuant to Section 5.1; provided,
however, that the Exchange Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Exchange Guarantee
Agreement, at the time of any such payment, any amounts are due and unpaid under
this Exchange Guarantee Agreement. If any amount shall be paid to the Exchange
Guarantor in violation of the preceding sentence, the Exchange Guarantor agrees
to hold such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 5.7. Independent Obligations.
The Exchange Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Exchange
Preferred Securities and that the Exchange Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Exchange Guarantee Agreement notwithstanding the occurrence of any
event referred to in subsection (a) through (g), inclusive, of Section 5.3
hereof.
ARTICLE VI. SUBORDINATION
SECTION 6.1. Subordination.
(a) This Exchange Guarantee Agreement will constitute an unsecured
obligation of the Exchange Guarantor and will rank subordinate and junior in
right of payment to all Senior Indebtedness of the Exchange Guarantor.
(b) The Exchange Guarantor may not make a Guarantee Payment to the
Holders if (i) any Senior Indebtedness of the Exchange Guarantor having an
outstanding principal amount at the time of determination in excess of
$10,000,000 (the "Specified Indebtedness") is not paid when due or (ii) any
other default on Specified Senior Indebtedness of the Exchange Guarantor occurs
and the maturity of such Specified Senior Indebtedness is accelerated in
accordance with its terms, unless, in either case, the default has been cured or
waived and any such acceleration has been rescinded or such Specified Senior
Indebtedness has been paid in full. However, the Exchange Guarantor may make a
Guarantee Payment without regard to the foregoing if the Exchange Guarantor and
the Exchange Guarantee Trustee receive written notice approving such payment
from a representative of the Specified Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second pre-
ceding sentence) with respect to any Specified Senior Indebtedness of the
Exchange Guarantor pursuant to which the maturity thereof may be accelerated
immediately without further notice
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(except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the guarantor may not make a
Guarantee Payment to the holders of Exchange Preferred Securities for a period
(a "Payment Blockage Period") commencing upon the receipt by the Exchange
Guarantee Trustee (with a copy to the Exchange Guarantor) of written notice (a
"Blockage Notice") of such default from the representative of the holders of
such Specified Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Exchange Guarantee
Trustee and the Exchange Guarantor from the representative of the holders of
such Specified Senior Indebtedness, (ii) because the default giving rise to such
Blockage Notice is no longer continuing or (iii) because such Specified Senior
Indebtedness has been repaid in full). Notwithstanding the provisions described
in the immediately preceding sentence, unless the holders of such Specified
Senior Indebtedness or the representative of such holders have accelerated the
maturity of such Specified Senior Indebtedness, the Exchange Guarantor may
resume Guarantee Payments after the end of such Payment Blockage Period. The
Exchange Guarantee Agreement shall not be subject to more than one Payment
Blockage Period in any consecutive 360-day period, irrespective of the number of
defaults with respect to Specified Senior Indebtedness during such period.
(c) Upon any payment or distribution of the assets of the Exchange
Guarantor upon a total or partial liquidation or dissolution or reorganization
of or similar proceeding relating to the Exchange Guarantor or its property, the
holders of Senior Indebtedness of the Exchange Guarantor will be entitled to
receive payment in full, and until the Senior Indebtedness of the Exchange
Guarantor is paid in full, any payment or distribution to which the Holders
would be entitled but for this Section 6.1 will be made to holders of such
Senior Indebtedness as their interests may appear. If a Distribution is made to
the Holders, that, due to this Section 6.1, should not have been made to them,
such Holders are required to hold it in trust for the holders of Senior
Indebtedness of the Exchange Guarantor and pay it over to them as their
interests may appear.
(d) If a Guarantee Payment is to be made by the Exchange Guarantor to
the Holders, the Exchange Guarantor or the Exchange Guarantee Trustee shall
promptly notify the holders of Senior Indebtedness of the Exchange Guarantor or
the representative of such holders of such Guarantee Payment. If any Senior
Indebtedness of the Exchange Guarantor is outstanding, the Exchange Guarantor
may not pay such Guarantee Payment until five Business Days after the
representative of all the issues of Senior Indebtedness of the Exchange
Guarantor receives notice of such Guarantee Payment and, thereafter, may pay
such Guarantee Payment only if the Exchange Guarantee Agreement otherwise
permits payment at that time.
ARTICLE VII. TERMINATION
SECTION 7.1. Termination.
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This Exchange Guarantee Agreement shall terminate and be of no further
force and effect upon (i) full payment of the Redemption Price of the Exchange
Preferred Securities, (ii) the distribution of Exchange Notes to the Holders in
exchange for all of the Exchange Preferred Securities or (iii) full payment of
the amounts payable in accordance with the Declaration upon liquidation of the
Issuer. Notwithstanding the foregoing, this Exchange Guarantee Agreement will
continue to be effective or will be reinstated, as the case may be, if at any
time any Holder must restore payment of any sums paid with respect to Exchange
Preferred Securities or this Exchange Guarantee Agreement.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.1. Successors and Assigns.
All guarantees and agreements in this Exchange Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Exchange Guarantor and shall inure to the benefit of the Holders of the
Exchange Preferred Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Exchange Guarantor that is permitted
under Article Eight of the Indenture and pursuant to which the assignee agrees
in writing to perform the Exchange Guarantor's obligations hereunder, the
Exchange Guarantor shall not assign its obligations hereunder.
SECTION 8.2. Amendments.
Except with respect to any changes that do not adversely affect the
rights of the Holders in any material respect (in which case no consent of the
Holders will be required), this Exchange Guarantee Agreement may only be amended
with the prior approval of the Holders of not less than a Majority in
liquidation amount of all outstanding Exchange Preferred Securities. The
provisions of Article VI of the Declaration concerning meetings of the Holders
shall apply to the giving of such approval. This Exchange Guarantee Agreement
shall not be amended without the prior receipt by the Exchange Guarantor of an
opinion of independent tax counsel to the effect that such amendment of this
Exchange Guarantee Agreement will not result in the recognition of income, gain
or loss by the Holders.
SECTION 8.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Exchange Guarantor, to the address set forth below
or such other address, facsimile number or to the attention of such other Person
as the Exchange Guarantor may give notice to the Holders:
Symons International Group, Inc.
15
<PAGE>
4720 Kingsway Drive
Indianapolis, IN 46205
Facsimile No.: (317) 259-6395
Attention: David L. Bates
(b) If given to the Issuer, in care of the Exchange Guarantee Trustee,
at the Issuer's (and the Exchange Guarantee Trustee's) address set forth below
or such other address as the Exchange Guarantee Trustee on behalf of the Issuer
may given notice to the Holders:
SIG Capital Trust I
c/o Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Facsimile No.:
Attention: Corporate Trust Administration
(c) if given to any Holder, at the address set forth on the books and
records of the Trust.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 8.4. Benefit.
This Exchange Guarantee Agreement is solely for the benefit of the
Holders and is not separately transferable from the Exchange Preferred
Securities.
SECTION 8.5. Interpretation.
In this Exchange Guarantee Agreement, unless the context otherwise
requires:
(a) capitalized terms used in this Exchange Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to them in
Section 1.1;
(b) a term defined anywhere in this Exchange Guarantee Agreement has
the same meaning throughout;
16
<PAGE>
(c) all references to "the Exchange Guarantee Agreement" or "this
Exchange Guarantee Agreement" are to this Exchange Guarantee Agreement as
modified, supplemented or amended from time to time;
(d) all references to this Exchange Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Exchange Guarantee Agreement
unless otherwise defined in this Exchange Guarantee Agreement or unless the
context otherwise requires;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Exchange Guarantee Agreement unless otherwise defined in this
Exchange Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include
the masculine, feminine and neuter genders.
SECTION 8.6. Governing Law.
THIS EXCHANGE GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instruments.
17
<PAGE>
THIS EXCHANGE GUARANTEE AGREEMENT is executed as of the day and year
first above written.
Symons International Group, Inc.
By:_______________________________________
Name: Alan G. Symons
Title: Chief Executive Officer
By:_______________________________________
Name: Gary P. Hutchcraft
Title: Vice President
Wilmington Trust Company,
as Exchange Guarantee Trustee
By:_______________________________________
Name:____________________________________
Title:_____________________________________
18
Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of August 12, 1997 among SYMONS INTERNATIONAL GROUP, INC.,
an Indiana corporation (the "Company"), SIG CAPITAL TRUST I, a business trust
created under the laws of the state of Delaware (the "Trust"), and DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION ("DLJ"), GOLDMAN, SACHS & CO., CIBC
WOOD GUNDY SECURITIES CORP., and MESIROW FINANCIAL, INC. (collectively the
"Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement,
dated August 7, 1997 (the "Purchase Agreement"), among the Company, as issuer of
the 9 1/2% Senior Subordinated Notes due 2027 (the "Senior Subordinated Notes"),
the Trust and the Initial Purchasers, which provides for, among other things,
the sale by the Trust to the Initial Purchasers of 135,000 of the Trust's 9 1/2%
Trust Preferred Securities, liquidation amount $1,000 per Trust Preferred
Security (the "Preferred Securities"), the proceeds of which will be used by the
Trust to purchase Senior Subordinated Notes. The Preferred Securities, together
with the Senior Subordinated Notes and the Company's guarantee of the Preferred
Securities (the "Company Guarantee"), are collectively referred to as the
"Securities". In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company and the Trust have agreed to provide to the
Initial Purchasers and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"Advice" shall have the meaning set forth in the last
paragraph of Section 3 hereof.
"Applicable Period" shall have the meaning set forth in
Section 3(t) hereof.
"Business Day" shall mean a day that is not a Saturday, a
Sunday, or a day on which banking institutions in New York, New York or
Wilmington, Delaware are authorized or required to be closed.
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble to
this Agreement and also includes the Company's successors and permitted
assigns.
"Declaration" or "Declaration of Trust" shall mean the Amended
and Restated Declaration of Trust, dated as of August 12, 1997, by and
among the Company Trustees, the Preferred Trustee and the Delaware
Trustee, each as defined therein, and the Company, as sponsor, and by
the holders, from time to time, of undivided beneficial interests in
the Trust.
<PAGE>
2
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by the Trust; provided, however, that such
depositary must have an address in the Borough of Manhattan, in The
City of New York.
"Effectiveness Period" shall have the meaning set forth in
Section 2(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Exchange Offer" shall mean the offer by the Company and the
Trust to the Holders to exchange all of the Registrable Securities
(other than Private Exchange Securities) for a like principal amount of
Exchange Securities pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchange Period" shall have the meaning set forth in Section
2(a) hereof.
"Exchange Securities" shall mean (i) with respect to the
Senior Subordinated Notes, the 9 1/2% Senior Subordinated Notes due
August 15, 2027 which are to be offered in exchange for the
Subordinated Notes (the "Exchange Notes") and which will contain terms
identical to the Senior Subordinated Notes (except that they will not
contain terms with respect to the transfer restrictions under the
Securities Act, will not require transfers thereof to be in minimum
blocks of $100,000 principal amount and will not provide for any
increase in the interest rate thereon), (ii) with respect to the
Preferred Securities, the Trust's 9 1/2% Trust Preferred Securities,
liquidation amount $1,000 per Preferred Security, which are to be
offered in exchange for the Preferred Securities (the "Exchange
Preferred Securities") and which will have terms identical to the
Preferred Securities (except they will not contain terms with respect
to transfer restrictions under the Securities Act, will not require
minimum transfers thereof to be in blocks of $100,000 liquidation
amount and will not provide for any increase in the distribution rate
thereon) and (iii) with respect to the Company Guarantee, the Company's
guarantee (the "Exchange Company Guarantee") of the Exchange Preferred
Securities which will have terms identical to the Company Guarantee.
"Holder" shall mean the Initial Purchasers, for so long as
they own any Registrable Securities, and each of their respective
successors, assigns and direct and indirect transferees who become
registered owners of Registrable Securities under the Indenture or
Declaration of Trust.
<PAGE>
3
"Indenture" shall mean the Indenture relating to the Senior
Subordinated Notes and the Exchange Notes dated as of August 12, 1997
among the Company, as issuer, and the Indenture Trustee, as defined
therein, as the same may be amended from time to time in accordance
with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the
preamble to this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(n)
hereof.
"Issue Date" shall mean the date of original issuance of the
Securities.
"Majority Holders" shall mean the Holders of a majority of the
aggregate liquidation amount of outstanding Preferred Securities.
"Participating Broker-Dealer" shall have the meaning set forth
in Section 3(t) hereof.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, limited liability company, or a
government or agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section
2(a) hereof.
"Private Exchange Securities" shall have the meaning set forth
in Section 2(a) hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to a prospectus, including post-effective amendments, and
in each case including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"Records" shall have the meaning set forth in Section 3(n)
hereof.
"Registrable Securities" shall mean the Securities and, if
issued, the Private Exchange Securities; provided, however, that
Securities or Private Exchange Securities, as the case may be, shall
cease to be Registrable Securities when (i) a Registration Statement
with respect to such Securities or Private Exchange Securities for the
exchange or resale thereof, as the case may be, shall have been
declared effective under the Securities Act and such Securities or
Private Exchange Securities, as the case may be, shall
<PAGE>
4
have been disposed of pursuant to such Registration Statement, (ii)
such Securities or Private Exchange Securities, as the case may be, may
be sold to the public pursuant to Rule 144(k) (or any similar provision
then in force, but not Rule 144A) under the Securities Act, (iii) such
Securities or Private Exchange Securities, as the case may be, shall
have ceased to be outstanding or (iv) with respect to the Securities,
such Securities have been exchanged for Exchange Securities upon
consummation of the Exchange Offer and are thereafter freely tradeable
by the holder thereof (other than an affiliate of the Company).
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC or National
Association of Securities Dealers, Inc. (the "NASD") registration and
filing fees, including, if applicable, the fees and expenses of any
"qualified independent underwriter" (and its counsel) that is required
to be retained by any Holder of Registrable Securities in accordance
with the rules and regulations of the NASD, (ii) all fees and expenses
incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of counsel for
any underwriters or Holders in connection with blue sky qualification
of any of the Exchange Securities or Registrable Securities) and
compliance with the rules of the NASD, (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus
and any amendments or supplements thereto, and in preparing or
assisting in preparing, printing and distributing any underwriting
agreements, securities sales agreements and other documents relating to
the performance of and compliance with this Agreement, (iv) all rating
agency fees, (v) the fees and disbursements of counsel for the Company
and of the independent certified public accountants of the Company,
including the expenses of any "cold comfort" letters required by or
incident to such performance and compliance, (vi) the fees and expenses
of the Trustee, and any exchange agent or custodian, (vii) all fees and
expenses incurred in connection with the listing, if any, of any of the
Registrable Securities on any securities exchange or exchanges, and
(viii) the reasonable fees and expenses of any special experts retained
by the Company in connection with any Registration Statement.
"Registration Statement" shall mean any registration statement
of the Company and the Trust which covers any of the Exchange
Securities or Registrable Securities pursuant to the provisions of this
Agreement, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including
the Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Rule 144(k) Period" shall mean the period of two years (or
such shorter period as may hereafter be referred to in Rule 144(k)
under the Securities Act (or similar successor rule)) commencing on the
Issue Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble
to this Agreement.
<PAGE>
5
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Senior Subordinated Notes" shall have the meaning set forth
in the preamble to this Agreement.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Event" shall have the meaning set forth in
Section 2(b) hereof.
"Shelf Registration Event Date" shall have the meaning set
forth in Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company and the Trust pursuant to the
provisions of Section 2(b) hereof which covers all of the Registrable
Securities or all of the Private Exchange Securities, as the case may
be, on an appropriate form under Rule 415 under the Securities Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"TIA" shall have the meaning set forth in Section 3(1) hereof.
"Trustees" shall mean any and all trustees with respect to (i)
the Preferred Securities under the Declaration, (ii) the Senior
Subordinated Notes under the Indenture and (iii) the Company Guarantee.
2. Registration Under the Securities Act.
(a) Exchange Offer. To the extent not prohibited by any
applicable law or applicable interpretation of the staff of the SEC, the Company
and the Trust shall, for the benefit of the Holders, at the Company's cost, use
its best efforts to (i) cause to be filed with the SEC by September 30, 1997 an
Exchange Offer Registration Statement on an appropriate form under the
Securities Act covering the Exchange Offer, (ii) cause such Exchange Offer
Registration Statement to be declared effective under the Securities Act by the
SEC not later than the date which is 180 days after the Issue Date, and (iii)
keep such Exchange Offer Registration Statement effective for not less than 30
calendar days (or longer if required by applicable law) after the date notice of
the Exchange Offer is mailed to the Holders. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company and the Trust shall promptly
commence the Exchange Offer, it being the objective of such Exchange Offer to
enable each Holder eligible and electing to exchange Registrable Securities for
a like principal amount of Exchange Notes or a like liquidation amount of
Exchange Preferred Securities, together with the Exchange Company Guarantee, as
applicable (assuming that such Holder is not an affiliate of the Company within
the meaning of Rule 405 under the Securities Act and is not a broker-dealer
tendering Registrable Securities acquired directly from the Company for its own
account, acquires the Exchange Securities in the
<PAGE>
6
ordinary course of such Holder's business and has no arrangements or
understandings with any Person to participate in the Exchange Offer for the
purpose of distributing the Exchange Securities), to transfer such Exchange
Securities from and after their receipt without any limitations or restrictions
under the Securities Act and under state securities or blue sky laws.
In connection with the Exchange Offer, the Company and the
Trust shall:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a
period of not less than 30 days after the date notice thereof is mailed
to the Holders (or longer if required by applicable law) (such period
referred to herein as the "Exchange Period");
(iii) utilize the services of the Depositary for the
Exchange Offer;
(iv) permit Holders to withdraw tendered Securities at any
time prior to the close of business, New York time, on the last
Business Day of the Exchange Period, by sending to the institution
specified in the notice, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of
Securities delivered for exchange, and a statement that such Holder is
withdrawing his election to have such Securities exchanged;
(v) notify each Holder that any Security not tendered by
such Holder in the Exchange Offer will remain outstanding and continue
to accrue interest or accumulate distributions, as the case may be, but
will not retain any rights under this Agreement (except in the case of
the Initial Purchasers and Participating Broker-Dealers as provided
herein); and
(vi) otherwise comply in all respects with all applicable
laws relating to the Exchange Offer.
If any Initial Purchaser determines upon advice of its outside
counsel that it is not eligible to participate in the Exchange Offer with
respect to the exchange of Securities constituting any portion of an unsold
allotment in the initial distribution, as soon as practicable upon receipt by
the Company and the Trust of a written request from such Initial Purchaser, the
Company and the Trust, as applicable, shall issue and deliver to such Initial
Purchaser in exchange (the "Private Exchange") for the Securities held by such
Initial Purchaser, a like liquidation amount of Preferred Securities of the
Trust, together with the Exchange Company Guarantee, or a like principal amount
of the Senior Subordinated Notes of the Company, as applicable, that are
identical (except that such securities may bear a customary legend with respect
to restrictions on transfer pursuant to the Securities Act) to the Exchange
Securities (the "Private Exchange Securities") and which are issued pursuant to
the Indenture, the Declaration or the Company Guarantee (which provides that the
Exchange Securities will not be subject to the transfer restrictions set forth
in the Indenture or the Declaration, as applicable, and that the Exchange
Securities, the Private Exchange
<PAGE>
7
Securities and the Securities will vote and consent together on all matters as
one class and that neither the Exchange Securities, the Private Exchange
Securities nor the Securities will have the right to vote or consent as a
separate class on any matter). The Private Exchange Securities shall be of the
same series as the Exchange Securities and the Company and the Trust will seek
to cause the CUSIP Service Bureau to issue the same CUSIP Numbers for the
Private Exchange Securities as for the Exchange Securities issued pursuant to
the Exchange Offer.
As soon as practicable after the close of the Exchange Offer
and, if applicable, the Private Exchange, the Company and the Trust, as the case
requires, shall:
(i) accept for exchange all Securities or portions
thereof tendered and not validly withdrawn pursuant to the Exchange
Offer or the Private Exchange;
(ii) deliver, or cause to be delivered, to the applicable
Trustee for cancellation all Securities or portions thereof so accepted
for exchange by the Company; and
(iii) issue, and cause the applicable Trustee under the
Indenture, the Declaration or the Company Guarantee, as applicable, to
promptly authenticate and deliver to each Holder, new Exchange
Securities or Private Exchange Securities, as applicable, equal in
principal amount to the principal amount of the Senior Subordinated
Notes or equal in liquidation amount to the liquidation amount of the
Preferred Securities (together with the guarantee thereof) as are
surrendered by such Holder.
Distributions on each Exchange Preferred Security and interest
on each Exchange Note issued pursuant to the Exchange Offer and in the Private
Exchange will accrue from the last date on which a distribution or interest was
paid on the Preferred Security or the Subordinated Note surrendered in exchange
therefor or, if no distribution or interest has been paid on such Preferred
Security or Subordinated Note, from the Issue Date. To the extent not prohibited
by any law or applicable interpretation of the staff of the SEC, the Company and
the Trust shall use their best efforts to complete the Exchange Offer as
provided above, and shall comply with the applicable requirements of the
Securities Act, the Exchange Act and other applicable laws in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the staff of the SEC. Each Holder of Registrable
Securities who wishes to exchange such Registrable Securities for Exchange
Securities in the Exchange Offer will be required to make certain customary
representations in connection therewith, including, in the case of any Holder of
Preferred Securities, representations that (i) it is not an affiliate of the
Trust or the Company, (ii) the Exchange Securities to be received by it were
acquired in the ordinary course of its business and (iii) at the time of the
Exchange Offer, it has no arrangement with any Person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange
Preferred Securities. The Company and the Trust shall inform the Initial
Purchasers, after consultation with the Trustee, of the names and addresses of
the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall
have the right to contact such Holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
<PAGE>
8
Upon consummation of the Exchange Offer in accordance with
this Section 2(a), the provisions of this Agreement shall continue to apply
solely with respect to Registrable Securities that are Private Exchange
Securities and Exchange Securities held by Participating Broker-Dealers, and the
Company and the Trust shall have no further obligation to register the
Registrable Securities (other than Private Exchange Securities) pursuant to
Section 2(b) of this Agreement.
(b) Shelf Registration. In the event that (i) the Company, the
Trust or the Majority Holders reasonably determine, after conferring with
counsel (which may be in-house counsel), that the Exchange Offer Registration
provided in Section 2(a) above is not available because of any change in law or
in currently prevailing interpretations of the staff of the SEC, (ii) the
Exchange Offer Registration Statement is not declared effective within 180 days
of the Issue Date, (iii) upon the request of any Initial Purchaser with respect
to any Registrable Securities held by it, if such Initial Purchaser is not
permitted, in the reasonable opinion of Simpson Thacher & Bartlett, pursuant to
applicable law or applicable interpretations of the staff of the SEC, to
participate in the Exchange Offer and thereby receive securities that are freely
tradeable without restriction under the Securities Act and applicable blue sky
or state securities laws or (iv) the Company has received an opinion of
independent tax counsel experienced in such matters, to the effect that, as a
result of the consummation of the Exchange Offer, there is more than an
insubstantial risk that (x) the Trust would be subject to United States federal
income tax with respect to income received or accrued on the Senior Subordinated
Notes or the Exchange Notes, (y) interest payable by the Company on such Senior
Subordinated Notes or Exchange Notes would not be deductible by the Company, in
whole or in part, for United States federal income tax purposes or (z) the Trust
would be subject to more than a de minimus amount of other taxes, duties or
other governmental charges (any of the events specified in (i)-(iv) being a
"Shelf Registration Event" and the date of occurrence thereof, the "Shelf
Registration Event Date"), the Company and the Preferred Trustee on behalf of
the Trust will (a) promptly deliver to the Holders and the Delaware Trustee
written notice thereof and (b) at the Company's sole expense, as promptly as
practicable after such Shelf Registration Event Date, as the case may be, and,
in any event, within 45 days after such Shelf Registration Event Date (which
shall be no earlier than 75 days after the Closing Time), file a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities, and shall use its best efforts to have such Shelf
Registration Statement declared effective by the SEC as soon as practicable. No
Holder of Registrable Securities shall be entitled to include any of its
Registrable Securities in any Shelf Registration pursuant to this Agreement
unless and until such Holder agrees in writing to be bound by all of the
provisions of this Agreement applicable to such Holder and furnishes to the
Company and the Trust in writing, within 15 days after receipt of a request
therefor, such information as the Company and the Trust may, after conferring
with counsel with regard to information relating to Holders that would be
required by the SEC to be included in such Shelf Registration Statement or
Prospectus including therein, reasonably request for inclusion in any Shelf
Registration Statement or Prospectus included therein. Each Holder as to which
any Shelf Registration is being effected agrees to furnish to the Company and
the Trust all information with respect to such Holder necessary to make the
information previously furnished to the Company by such Holder not materially
misleading.
<PAGE>
9
The Company and the Trust agree to use their best efforts to
keep the Shelf Registration Statement continuously effective for the Rule 144(k)
Period (subject to extension pursuant to the last paragraph of Section 3 hereof)
or for such shorter period which will terminate when all of the Registrable
Securities covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement or cease to be outstanding (the
"Effectiveness Period"). The Company and the Trust shall not permit any
securities other than Registrable Securities to be included in the Shelf
Registration. The Company and the Trust will, in the event a Shelf Registration
Statement is filed, provide to each Holder a reasonable number of copies of the
Prospectus which is a part of the Shelf Registration Statement, notify each such
Holder when the Shelf Registration has become effective and take certain other
actions as are required to permit certain unrestricted resales of the
Registrable Securities. The Company and the Trust further agree, if necessary,
to supplement or amend the Shelf Registration Statement, if required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration Statement or by the Securities Act or by
any other rules and regulations thereunder for shelf registrations, and the
Company and the Trust agree to furnish to the Holders of Registrable Securities
copies of any such supplement or amendment promptly after its being used or
filed with the SEC.
(c) Expenses. The Company, in its capacity as borrower, shall
pay all Registration Expenses in connection with the registration pursuant to
Section 2(a) or 2(b) hereof and will reimburse the Initial Purchasers for the
reasonable fees and disbursements of Simpson Thacher & Bartlett, counsel for the
Initial Purchasers, incurred in connection with the Exchange Offer (if the
assistance of such Initial Purchasers is requested by the Company) and, if
applicable, the Private Exchange, and either Simpson Thacher & Bartlett or any
one other counsel designated in writing by the Majority Holders to act as
counsel for the Holders of the Registrable Securities in connection with a Shelf
Registration Statement, which other counsel shall be reasonably satisfactory to
the Company. Except as provided herein, each Holder shall pay all expenses of
its counsel, underwriting discounts and commissions and transfer taxes if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer
Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration
Statement pursuant to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC; provided, however,
that if after it has been declared effective, the offering of Registrable
Securities pursuant to a Shelf Registration Statement is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be deemed not to
have been effective during the period of such interference, until the offering
of Registrable Securities pursuant to such Registration Statement may legally
resume. The Company and the Trust will be deemed not to have used their best
efforts to cause the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, to become, or to remain, effective
during the requisite period if either of them voluntarily takes any action that
would result in any such Registration Statement not being declared effective or
in the Holders of Registrable Securities covered thereby not being able to
exchange or offer and sell such Registrable Securities during that period unless
such action is required by applicable law.
<PAGE>
10
(e) Additional Interest. In the event that (i) (A) neither the
Exchange Offer Registration Statement nor a Shelf Registration Statement is
filed with the SEC on or prior to September 30, 1997 or (B) notwithstanding that
the Company and the Trust have consummated or will consummate an Exchange Offer,
the Company and the Trust are required to file a Shelf Registration Statement
and such Shelf Registration Statement is not filed on or prior to the date
required by Section 2(b) hereof, then commencing on the day after the applicable
required filing date, additional interest shall accrue on the principal amount
of the Senior Subordinated Notes, and additional distributions shall accumulate
on the liquidation amount of the Preferred Securities, each at a rate of 0.25%
per annum; or
(ii)(A) neither the Exchange Offer Registration Statement nor
a Shelf Registration Statement is declared effective by the SEC on or prior to
the 180th day after Issue Date or (B) notwithstanding that the Company and the
Trust have consummated or will consummate an Exchange Offer, the Company and the
Trust are required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the SEC on or prior to the
180th day after the Issue Date, then, additional interest shall accrue on the
principal amount of the Senior Subordinated Notes and additional distributions
shall accumulate on the liquidation amount of the Preferred Securities, each at
a rate of 0.25% per annum; or
(iii)(A) the Trust has not exchanged Exchange Preferred
Securities for all Preferred Securities or the Company has not exchanged
Exchange Company Guarantees or Exchange Notes for all Company Guarantees or all
Senior Subordinated Notes validly tendered, in accordance with the terms of the
Exchange Offer on or prior to the 30th day after the date on which the Exchange
Offer Registration Statement was declared effective or (B) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the second
anniversary of the Issue Date (other than after such time as all Preferred
Securities have been disposed of thereunder or otherwise cease to be Registrable
Securities), then additional interest shall accrue on the principal amount of
Senior Subordinated Notes, and additional distributions shall accumulate on the
liquidation amount of the Preferred Securities, each at a rate of 0.25% per
annum commencing on (x) the 31st day after such effective date, in the case of
(A) above, or (y) the day such Shelf Registration Statement ceases to be
effective in the case of (B) above; provided, however, that neither the
additional interest rate on the Senior Subordinated Notes, nor the additional
distribution rate on the liquidation amount of the Preferred Securities, may
exceed in the aggregate 0.25% per annum; provided, further, however, that (1)
upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (ii) above), or (3) upon the
exchange of Exchange Preferred Securities, Exchange Company Guarantees and
Exchange Notes for all Preferred Securities, Company Guarantees and Senior
Subordinated Notes tendered (in the case of clause (iii)(A) above), or upon the
effectiveness of the Shelf Registration Statement which had ceased to remain
effective (in the case of clause (iii)(B) above), additional interest on the
Senior Subordinated Notes, and additional distributions on the liquidation
amount of the Preferred Securities as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
<PAGE>
11
Any amounts of additional interest and additional
distributions due pursuant to Section 2(e)(i), (ii) or (iii) above will be
payable in cash on the relevant record dates for the payment of interest and
distributions pursuant to the Indenture and the Declaration respectively.
(f) Specific Enforcement. Without limiting the remedies
available to the Holders, the Company and the Trust acknowledge that any failure
by the Company or the Trust to comply with its obligations under Section 2(a)
and Section 2(b) hereof may result in material irreparable injury to the Holders
for which there is no adequate remedy at law, that it would not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, any Holder may obtain such relief as may be required to specifically
enforce the Company's and the Trust's obligations under Section 2(a) and Section
2(b) hereof.
3. Registration Procedures. In connection with the obliga-
tions of the Company and the Trust with respect to the Registration Statements
pursuant to Sections 2(a) and 2(b) hereof, the Company and the Trust shall use
their best efforts to:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof within
the relevant time period specified in Section 2 hereof on the appropriate form
under the Securities Act, which form (i) shall be selected by the Company and
the Trust, (ii) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Securities by the selling Holders thereof and (iii)
shall comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith; and use its best efforts to cause such Registration Statement
to become effective and remain effective in accordance with Section 2 hereof;
provided, however, that if (1) such filing is pursuant to Section 2(b), or (2) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2(a) is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities, before filing
any Registration Statement or Prospectus or any amendments or supplements
thereof, the Company and the Trust shall furnish to and afford the Holders of
the Registrable Securities and each such Participating Broker-Dealer, as the
case may be, covered by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed. The Company
and the Trust shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders must be
afforded an opportunity to review prior to the filing of such document if the
Majority Holders or such Participating Broker-Dealer, as the case may be, their
counsel or the managing underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement effective for the Effectiveness Period or the
Applicable Period, as the case may be; and cause each Prospectus to be
supplemented, if so determined by the Company or the Trust or requested by the
SEC, by any required prospectus supplement and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act, and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations promulgated thereunder applicable to
it with respect to the disposition of all securities covered by each
<PAGE>
12
Registration Statement during the Effectiveness Period or the Applicable Period,
as the case may be, in accordance with the intended method or methods of
distribution by the selling Holders thereof described in this Agreement
(including sales by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities included in the Shelf Registration Statement,
at least three Business Days prior to filing, that a Shelf Registration
Statement with respect to the Registrable Securities is being filed and advising
such Holder that the distribution of Registrable Securities will be made in
accordance with the method selected by the Majority Holders; and (ii) furnish to
each Holder of Registrable Securities included in the Shelf Registration
Statement and to each underwriter of an underwritten offering of Registrable
Securities, if any, without charge, as many copies of each Prospectus, including
each preliminary Prospectus, and any amendment or supplement thereto and such
other documents as such Holder or underwriter may reasonably request, in order
to facilitate the public sale or other disposition of the Registrable
Securities; and (iii) consent to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Registrable Securities
included in the Shelf Registration Statement in connection with the offering and
sale of the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(d) in the case of a Shelf Registration, use its best efforts
to register or qualify the Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions by the time the applicable
Registration Statement is declared effective by the SEC as any Holder of
Registrable Securities covered by a Registration Statement and each underwriter
of an underwritten offering of Registrable Securities shall reasonably request
in writing in advance of such date of effectiveness, and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
Holder and underwriter to consummate the disposition in each such jurisdiction
of such Registrable Securities owned by such Holder; provided, however, that the
Company and the Trust shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (ii) file any
general consent to service of process in any jurisdiction where it would not
otherwise be subject to such service of process or (iii) subject itself to
taxation in any such jurisdiction if it is not then so subject;
(e) in the case of (1) a Shelf Registration or (2)
Participating Broker-Dealers from whom the Company or the Trust has received
prior written notice that they will be utilizing the Prospectus contained in the
Exchange Offer Registration Statement as provided in Section 3(t) hereof and who
are seeking to sell Exchange Securities and are required to deliver
Prospectuses, notify each Holder of Registrable Securities, or such
Participating Broker-Dealers, as the case may be, their counsel and the managing
underwriters, if any, promptly and promptly confirm such notice in writing (i)
when a Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for amendments and supplements to a
Registration Statement or Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the qualification of the Registrable Securities or
the Exchange Securities to be offered or sold by any Participating Broker-Dealer
in any jurisdiction described in paragraph 3(d) hereof or the initiation of any
proceedings for that purpose, (iv) in the
<PAGE>
13
case of a Shelf Registration, if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered thereby,
the representations and warranties of the Company and the Trust contained in any
purchase agreement, securities sales agreement or other similar agreement, if
any cease to be true and correct in all material respects, (v) of the happening
of any event or the failure of any event to occur or the discovery of any facts
or otherwise, during the Effectiveness Period which makes any statement made in
such Registration Statement or the related Prospectus untrue in any material
respect or which causes such Registration Statement or Prospectus to omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and (vi) of the
Company and the Trust's reasonable determination that a post-effective amendment
to the Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities included within the coverage of such Shelf
Registration Statement, without charge, at least one conformed copy of each
Registration Statement relating to such Shelf Registration and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends and in such denominations (consistent with
the provisions of the Indenture and the Declaration) and registered in such
names as the selling Holders or the underwriters may reasonably request at least
two Business Days prior to the closing of any sale of Registrable Securities
pursuant to such Shelf Registration Statement;
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by Section
3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, use its best efforts to prepare
a supplement or post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and to notify each Holder to suspend use of the Prospectus
as promptly as practicable after the occurrence of such an event, and each
Holder hereby agrees to suspend use of the Prospectus to correct such
misstatement or omission;
(j) in the case of a Shelf Registration, a reasonable time
prior to the filing of any document which is to be incorporated by reference
into a Registration Statement or a Prospectus after the initial filing of a
Registration Statement, provide a reasonable number of copies of such document
to the Holders; and make such of the representatives of the Company and the
Trust as shall be reasonably requested by the Holders of Registrable Securities
or the Initial Purchasers on behalf of such Holders available for discussion of
such document;
<PAGE>
14
(k) obtain a CUSIP number for all Exchange Preferred
Securities and the Preferred Securities (and if the Trust has made a
distribution of the Senior Subordinated Notes to the Holders of the Preferred
Securities, the Senior Subordinated Notes or the Exchange Notes) as the case may
be, not later than the effective date of a Registration Statement, and provide
the Trustee with printed certificates for the Exchange Securities or the
Registrable Securities, as the case may be, in a form eligible for deposit with
the Depositary;
(l) cause the Indenture, the Declaration, the Company
Guarantee and the Exchange Company Guarantee to be qualified under the Trust
Indenture Act of 1939 (the "TIA") in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be, and effect
such changes to such documents as may be required for them to be so qualified in
accordance with the terms of the TIA and execute, and use its best efforts to
cause the relevant trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be filed with
the SEC to enable such documents to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into such
agreements (including underwriting agreements) as are customary in underwritten
offerings and take all such appropriate actions as are reasonably requested in
order to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration, if requested by (x) any Initial Purchaser, in the case where an
Initial Purchaser holds Securities acquired by it as part of its initial
distribution and (y) other Holders of Securities covered thereby: (i) make such
representations and warranties to Holders of such Registrable Securities and the
underwriters (if any), with respect to the business of the Trust, the Company
and its subsidiaries as then conducted and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and the Trust and
updates thereof (which may be in the form of a reliance letter) in form and
substance reasonably satisfactory to the managing underwriters (if any) and the
Holders of a majority in principal amount of the Registrable Securities being
sold, addressed to each selling Holder and the underwriters (if any) covering
the matters customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by such underwriters (it
being agreed that the matters to be covered by such opinion may be subject to
customary qualifications and exceptions); (iii) obtain "cold comfort" letters
and updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of the
Company and the Trust (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company and the Trust or of any business
acquired by the Company and the Trust for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings and such other
matters as are reasonably requested by such underwriters in accordance with
Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable than those set forth in Section 4 hereof (or such other
provisions and procedures acceptable to
<PAGE>
15
Holders of a majority in aggregate principal amount of Registrable Securities
covered by such Registration Statement and the managing underwriters or agents)
with respect to all parties to be indemnified pursuant to said Section
(including, without limitation, such underwriters and selling Holders). The
above shall be done at each closing under such underwriting agreement, or as and
to the extent required thereunder;
(n) if (1) a Shelf Registration is filed pursuant to Section
2(b) or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2(a) is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, make reasonably available for inspection by any
selling Holder of such Registrable Securities being sold, or each such
Participating Broker- Dealer, as the case may be, any underwriter participating
in any such disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be, or underwriter (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate documents
and properties of the Trust, the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors and
employees of the Trust, the Company and its subsidiaries to supply all relevant
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement; provided, however, that the
foregoing inspection and information gathering shall be coordinated on behalf of
the Initial Purchasers by you and on behalf of the other parties, by one counsel
designated by you and on behalf of such other parties as described in Section
2(c) hereof. Records which the Company and the Trust determine, in good faith,
to be confidential and any records which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a material misstatement or
omission in such Registration Statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or is necessary in connection with any action, suit or proceeding
or (iii) the information in such Records has been made generally available to
the public. Each selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to agree in writing that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Trust or the Company unless and until such
is made generally available to the public by the Company. Each selling Holder of
such Registrable Securities and each such Participating Broker-Dealer will be
required to further agree in writing that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company at its expense to undertake appropriate action
to prevent disclosure of the Records deemed confidential;
(o) comply with all applicable rules and regulations of the
SEC so long as any provision of this Agreement shall be applicable and make
generally available to its securityholders earning statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold
<PAGE>
16
to underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods;
(p) upon consummation of an Exchange Offer or a Private
Exchange, if requested by a Trustee, obtain an opinion of counsel to the Company
addressed to the Trustee for the benefit of all Holders of Registrable
Securities participating in the Exchange Offer or the Private Exchange, as the
case may be, and which includes an opinion that (i) the Company and the Trust,
as the case requires, has duly authorized, executed and delivered the Exchange
Securities and Private Exchange Securities, and (ii) each of the Exchange
Securities or the Private Exchange Securities, as the case may be, constitute a
legal, valid and binding obligation of the Company or the Trust, as the case
requires, enforceable against the Company or the Trust, as the case requires, in
accordance with its respective terms (in each case, with customary exceptions);
(q) if an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to the
Company or the Trust, as applicable (or to such other Person as directed by the
Company or the Trust, respectively), in exchange for the Exchange Securities or
the Private Exchange Securities, as the case may be, the Company or the Trust,
as applicable, shall mark, or cause to be marked, on such Registrable Securities
delivered by such Holders that such Registrable Securities are being cancelled
in exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall such Registrable Securities be marked as paid
or otherwise satisfied;
(r) cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
NASD;
(s) use its best efforts to take all other steps necessary to
effect the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer Registration
Statement (i) include in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," which section shall be reasonably acceptable to
the Initial Purchasers or another representative of the Participating
Broker-Dealers, and which shall contain a summary statement of the positions
taken or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer (a "Participating Broker-Dealer") that
holds Registrable Securities acquired for its own account as a result of
market-making activities or other trading activities and that will be the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities to be received by such broker-dealer in the Exchange Offer, whether
such positions or policies have been publicly disseminated by the staff of the
SEC or such positions or policies, in the reasonable judgment of the Initial
Purchasers or such other representative, represent the prevailing views of the
staff of the SEC, including a statement that any such broker-dealer who receives
Exchange Securities for Registrable Securities pursuant to the Exchange Offer
may be deemed a statutory underwriter and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Securities, (ii) furnish to each Participating Broker- Dealer who has
delivered to the Company the notice referred to in Section 3(e), without charge,
as many copies of each Prospectus included in the Exchange Offer Registration
Statement, including any preliminary prospectus, and any amendment or supplement
thereto, as such Participating Broker-Dealer may reasonable request (each of the
Company and the Trust hereby consents to the use of the Prospectus forming part
of the Exchange Offer Registration Statement or any amendment or supplement
thereto by any Person subject to the prospectus delivery requirements of the
Securities Act, including all Participating Broker-Dealers, in connection with
the sale or transfer of the Exchange Securities covered by the Prospectus or any
amendment or supplement thereto), (iii) use its best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such Persons must comply with such
requirements under the Securities Act and applicable rules and regulations in
order to resell the Exchange Securities; provided, however, that such period
shall not be required to exceed 90 days (or such longer period if extended
pursuant to the last sentence of Section 3 hereof) (the "Applicable Period"),
and (iv) include in the transmittal letter or similar documentation to be
executed by an exchange offeree in order to participate in the Exchange Offer
(x) the following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Securities acquired for its own account as a
result of market making activities or other trading
activities, it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any
resale of Exchange Securities received in respect of such
Registrable Securities pursuant to the Exchange Offer";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus in
connection with the exchange of Registrable Securities, the broker-dealer will
not be deemed to admit that it is an underwriter within the meaning of the
Securities Act; and
(B) in the case of any Exchange Offer Registration Statement,
the Company and the Trust agree to deliver to the Initial Purchasers or to
another representative of the Participating Broker-Dealers, if requested by any
such Initial Purchasers or such other representative of the Participating
Broker-Dealers, on behalf of the Participating Broker-Dealers upon consummation
of the Exchange Offer (i) an opinion of counsel in form and substance reasonable
satisfactory to the Initial Purchasers or such other representative of the
Participating Broker-Dealers, covering the matters customarily covered in
opinions requested in connection with Exchange Offer Registration Statements and
such other matters as may be reasonably requested (it being agreed that the
matters to be covered by such opinion may be subject to customary qualifications
and exceptions), (ii) an officers' certificate containing certifications
substantially similar to those set forth in Section 5(g) of the Purchase
Agreement and such additional certifications as are customarily delivered in a
public offering of debt securities and (iii) as well as upon the effectiveness
of the Exchange Offer Registration Statement, a comfort letter, in each case, in
customary form if permitted by Statement on Auditing Standards No. 72.
<PAGE>
17
The Company or the Trust may require each seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company or the Trust, as applicable, such information regarding such
seller as may be required by the staff of the SEC to be included in a
Registration Statement. The Company or the Trust may exclude from such
registration the Registrable Securities of any seller who unreasonably fails to
furnish such information within a reasonable time after receiving such request.
The Company shall have no obligation to register under the Securities Act the
Registrable Securities of a seller who so fails to furnish such information.
In the case of (1) a Shelf Registration Statement or (2)
Participating Broker-Dealers who have notified the Company and the Trust that
they will be utilizing the Prospectus contained in the Exchange Offer
Registration Statement as provided in Section 3(t) hereof and who are seeking to
sell Exchange Securities and are required to deliver Prospectuses, each Holder
agrees that, upon receipt of any notice from the Company or the Trust of the
happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii),
3(e)(v) or 3(e)(vi) hereof, such Holder will forthwith discontinue disposition
of Registrable Securities pursuant to a Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(i) hereof or until it is advised in writing (the
"Advice") by the Company and the Trust that the use of the applicable Prospectus
may be resumed, and, if so directed by the Company and the Trust, such Holder
will deliver to the Company or the Trust (at the Company's or the Trust's
expense, as the case requires) all copies in such Holder's possession, other
than permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities or Exchange Securities, as the case may be,
current at the time of receipt of such notice. If the Company or the Trust shall
give any such notice to suspend the disposition of Registrable Securities or
Exchange Securities, as the case may be, pursuant to a Registration Statement,
the Company and the Trust shall use their best efforts to file and have declared
effective (if an amendment) as soon as practicable an amendment or supplement to
the Registration Statement and shall extend the period during which such
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days in the period from and including the date of the giving of
such notice to and including the date when the Company and the Trust shall have
made available to the Holders (x) copies of the supplemented or amended
Prospectus necessary to resume such dispositions or (y) the Advice.
4. Indemnification and Contribution. (a) In connection with
any Registration Statement, the Company and the Trust shall, jointly and
severally, indemnify and hold harmless each Initial Purchaser, each Holder, each
underwriter who participates in an offering of the Registrable Securities, each
Participating Broker-Dealer, each Person, if any, who controls any of such
parties within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act and each of their respective directors, officers, employees and
agents, as follows:
(i) from and against any and all loss, liability, claim,
damage and expense whatsoever, joint or several, as incurred, arising
out of any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment
thereto), covering Registrable Securities or Exchange Securities,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the
<PAGE>
18
statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) from and against any and all loss, liability, claim,
damage and expense whatsoever, joint or several, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any court or governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the prior
written consent of the Company; and
(iii) from and against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of counsel chosen
by such Holder (which such counsel shall be subject to the reasonable
approval of the Company), such Participating Broker- Dealer, or any
underwriter (except to the extent otherwise expressly provided in
Section 4(c) hereof)), reasonably incurred in investigating, preparing
or defending against any litigation, or any investigation or proceeding
by any court or governmental agency or body, commenced or threatened,
or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii)
of this Section 4(a);
provided, however, that (i) this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished in writing to the
Company or the Trust by such Holder, such Participating Broker-Dealer or any
underwriter with respect to such Holder, Participating Broker-Dealer or any
Underwriter, as the case may be, expressly for use in the Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment or supplement
thereto) and (ii) the Company and the Trust shall not be liable to any such
Holder, Participating Broker-Dealer, any underwriter or controlling person, with
respect to any untrue statement or alleged untrue statement or omission or
alleged omission in any preliminary Prospectus to the extent that any such loss,
liability, claim, damage or expense of any Holder, Participating Broker-Dealer,
any underwriter or controlling person results from the fact that such Holder,
Participating Broker-Dealer, underwriter or controlling person sold Securities
to a Person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final Prospectus as then amended or
supplemented if the Company had previously furnished copies thereof to such
Holder, Participating Broker-Dealer, underwriter or controlling person and the
loss, liability, claim, damage or expense of such Holder, Participating
Broker-Dealer, underwriter or controlling person results from an untrue
statement or omission of a material fact contained in the preliminary Prospectus
which was corrected in the final Prospectus. Any amounts advanced by the Company
or the Trust to an indemnified party pursuant to this Section 4 as a result of
such losses shall be returned to the Company or the Trust if it shall be finally
determined by such a court in a judgment not subject to appeal or final review
that such indemnified party was not entitled to indemnification by the Company
or the Trust.
<PAGE>
19
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Trust, any underwriter and the
other selling Holders and each of their respective directors, officers
(including each officer of the Company and the Trust who signed the Registration
Statement), employees, trustees and agents and each Person, if any, who controls
the Company, the Trust, any underwriter or any other selling Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all loss, liability, claim, damage and expense
whatsoever described in the indemnity contained in Section 4(a) hereof, as
incurred, but only with respect to actions taken in connection with distribution
of the Securities in violation of, or untrue statements or omissions, or alleged
untrue statements or omissions, made in, the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment to supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company or the Trust by such selling Holder with respect to such Holder
expressly for use in the Registration Statement (or any amendment thereto), or
any such Prospectus (or any amendment or supplement thereto); provided, however,
that, in the case of a Shelf Registration Statement, no such Holder shall be
liable for any claims hereunder in excess of the amount of net proceeds received
by such Holder from the sale of Registrable Securities pursuant to such Shelf
Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers properly
served on such indemnified party, but failure to so notify an indemnifying party
shall not relieve such indemnifying party from any liability which it may have
under this Section 4, except to the extent that it is materially prejudiced by
such failure. An indemnifying party may participate at its own expense in the
defense of such action. If an indemnifying party so elects within a reasonable
time after receipt of such notice, an indemnifying party, severally or jointly
with any other indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and reasonably acceptable to
the indemnified parties defendant in such action; provided, however, that if (i)
representation of such indemnified party by the same counsel would present a
conflict of interest or (ii) the actual or potential defendants in, or targets
of, any such action include both the indemnified party and the indemnifying
party and any such indemnified party reasonably determines that there be any
legal defenses available to such indemnified party which are different from or
in addition to those available to such indemnifying party, then in the case of
clauses (i) and (ii) of this Section 4(c), such indemnifying party and counsel
for each indemnifying party or parties shall not be entitled to assume such
defense. If an indemnifying party is not entitled to assume the defense of such
action as a result of the proviso to the preceding sentence, counsel for such
indemnifying party and counsel for each indemnified party or parties shall be
entitled to conduct the defense of such indemnified party or parties. If an
indemnifying party assumes the defense of such action, in accordance with and as
permitted by the provisions of this paragraph, such indemnifying parties shall
not be liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action. Subject to the foregoing, in
no event shall the indemnifying parties be liable for the fees and expenses of
more than one counsel (in addition to local counsel), separate from its own
counsel, for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment
<PAGE>
20
with respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 4 (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional written release in form and substance satisfactory to the
indemnified parties of each indemnified party from all liability arising out of
such litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company, the Trust and the
Holders shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement incurred by
the Company, the Trust and the Holders, as incurred; provided that no Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person that was not
guilty of such fraudulent misrepresentation. As between the Company, the Trust
and the Holders, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of the Company and Trust, on the one hand, and the Holders, on
the other hand, with respect to the statements or omissions which resulted in
such loss, liability, claim, damage or expense, or action in respect thereof, as
well as any other relevant equitable considerations. The relative fault of the
Company and the Trust, on the one hand, and of the Holders, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Trust, on the one hand, or by or on behalf of the Holders, on the other, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Trust and the
Holders of the Registrable Securities agree that it would not be just and
equitable if contribution pursuant to this Section 4 were to be determined by
pro rata allocation or by any other method of allocation that does not take into
account the relevant equitable considerations. For purposes of this Section 4,
each affiliate of a Holder, and each director, officer, employee, agent and
Person, if any, who controls a Holder or such affiliate within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Holder, and each director of each of the
Company and the Trust, each officer of each of the Company and the Trust who
signed the Registration Statement, and each Person, if any, who controls each of
the Company and the Trust within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, shall have the same rights to contribution as
each of the Company or the Trust.
5. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
<PAGE>
21
6. Section of Underwriters. The Holders of Registrable
Securities covered by the Shelf Registration Statement who desire to do so may
sell the securities covered by such Shelf Registration in an underwritten
offering. In any such underwritten offering, the underwriter or underwriters and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of the Registrable
Securities included in such offering; provided, however, that such underwriters
and managers must be satisfactory to the Company and the Trust.
7. Miscellaneous.
(a) Rule 144 and Rule 144A. For so long as the Company or the
Trust is subject to the reporting requirements of Section 13 or 15 of the
Exchange Act and any Registrable Securities remain outstanding, each of the
Company and the Trust, as the case may be, will use its best efforts to file the
reports required to be filed by it under the Securities Act and Section 13(e) or
15(d) of the Exchange Act and the rules and regulations adopted by the SEC
thereunder, that if it ceases to be so required to file such reports, it will,
upon the request of any Holder of Registrable Securities (a) make publicly
available such information as is necessary to permit sales of their securities
pursuant to Rule 155A under the Securities Act, (b) deliver such information to
a prospective purchaser as is necessary to permit sales of their securities
pursuant to Rule 144A under the Securities Act and it will take such further
action as any Holder of Registrable Securities may reasonably request, and (c)
take such further action that is reasonable in the circumstances, in each case,
to the extent required from time to time to enable such Holder to sell its
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such rule may be amended from time to time, (ii) Rule 144A under the
Securities Act, as such rule may be amended from time to time, or (iii) any
similar rules or regulations hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Company and the Trust will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
(b) No Inconsistent Agreements. The Company or the Trust has
not entered into nor will the Company or the Trust on or after the date of this
Agreement enter into any agreement which is inconsistent with the rights granted
to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not conflict with and are not inconsistent with the rights granted
to the holders of the Company's or the Trust's other issued and outstanding
securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions thereof
may not be given unless the Company and the Trust has obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or departure; provided no amendment, modification,
supplement, waiver or consent to the departure with respect to the provisions of
Section 4 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder of Registrable
Securities. Notwithstanding the foregoing sentence, (i) this Agreement may be
amended, without the consent of any Holder of Registrable Securities, by written
agreement signed
<PAGE>
22
by the Company, the Trust and DLJ, to cure any ambiguity, correct or supplement
any provision of this Agreement that may be inconsistent with any other
provision of this Agreement or to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with other provisions of this Agreement, (ii) this Agreement may be
amended, modified or supplemented, and waivers and consents to departures from
the provisions hereof may be given, by written agreement signed by the Company,
the Trust and DLJ to the extent that any such amendment, modification,
supplement, waiver or consent is, in their reasonable judgment, necessary or
appropriate to comply with applicable law (including any interpretation of the
Staff of the SEC) or any change therein and (iii) to the extent any provision of
this Agreement relates to the Initial Purchasers, such provision may be amended,
modified or supplemented, and waivers or consents to departures from such
provisions may be given, by written agreement signed by DLJ, the Company and the
Trust.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telefax, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company or the Trust by means of a notice given in accordance with the
provisions of this Section 7(d), which address initially is, with respect to the
Initial Purchasers, the address set forth in the Purchase Agreement; and (ii) if
to the Company or the Trust, initially at the Company's address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
gives in accordance with the provisions of this Section 7(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchasers, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Initial Purchasers
shall be a third party beneficiary of the agreements made hereunder between the
Company and the Trust, on the one hand, and the Holders, on the other hand, and
shall have the right to enforce such agreements
<PAGE>
23
directly to the extent it deems such enforcement necessary or advisable to
protect its rights or the rights of Holders hereunder.
(g) Counterparts. This agreement may be executed in any number
of counterparts and by the parties herein in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company, the Trust or its
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by the Company, the Trust or its affiliates (as such term is
defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
<PAGE>
24
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SYMONS INTERNATIONAL GROUP, INC.
By:__/s/ Alan G. Symons________________
Name: Alan G. Symons
Title: Chief Executive Officer
SIG CAPITAL TRUST I
By:__/s/ Alan G. Symons________________
Name: Alan G. Symons
Title: Company Trustee
Confirmed and accepted as of the date first above written:
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
as Representative of the Several
Initial Purchasers
By:_______________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SYMONS INTERNATIONAL GROUP, INC.
By:____________________________________
Name: Alan G. Symons
Title: Chief Executive Officer
SIG CAPITAL TRUST I
By:____________________________________
Name: Alan G. Symons
Title: Company Trustee
Confirmed and accepted as of the date first above written:
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
as Representative of the Several
Initial Purchasers
By:__/s/ Jonathan D. Kelly_______________
Name: Jonathan D. Kelly
Title: Vice President
<PAGE>
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated August 12, 1997
among
SYMONS INTERNATIONAL GROUP, INC.,
SIG CAPITAL TRUST I
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.,
as Initial Purchasers
- --------------------------------------------------------------------------------
Exhibit 5.1
September 16, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
SIMPSON THACHER & BARTLETT
425 Lexington Avenue
New York, New York 10017-3954
Re: Symons International Group, Inc./ $139,176,000 9 1/2% Senior Subordinated
Notes
Dear Sirs:
We have acted as counsel for Symons International Group, Inc., an
Indiana corporation (the "Company") in connection with (i) the issuance of
$139,176,000 9 1/2% Senior Subordinated Notes of the Company, and (ii) the
execution of certain documents in connection therewith, including, but not
limited to the Senior Subordinated Indenture, the Amended and Restated
Declaration of Trust, the Preferred Securities Company Guarantee, the Common
Securities Company Guarantee, the Registration Rights Agreement, the Purchase
Agreement, the Preliminary Offering Memorandum and the Offering Memorandum, all
as referred to in the Purchase Agreement, dated August 7, 1997, between you, the
Company and SIG Capital Trust I.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 2
In rendering the legal opinions expressed herein, we have reviewed
applicable law, have made such inquiries as we have deemed relevant and
necessary and have examined the original instruments, documents, certificates
and records we have deemed necessary in rendering these opinions, including but
not limited to the following:
1. Certificate of Existence of the Company, dated August 8, 1997 by the
Secretary of State of Indiana.
2. Articles of Incorporation and By-Laws of the Company, certified by
the Secretary of the Company.
3. Preliminary Offering Memorandum, dated July 23, 1997.
4. Offering Memorandum, dated August 7, 1997.
5. The Operative Documents to be delivered on the Closing Date.
Any term not defined herein shall have the same meaning as set forth in
the Purchase Agreement.
Based upon our examination of the foregoing instruments, documents and
certificates, and in reliance upon the completeness, correctness, accuracy,
truth and authenticity thereof and of the information therein contained and
certain representations made to us by certain officers of the Company,
concerning which information we express no opinion and declare that we have made
no independent investigation of the truth, accuracy or completeness thereof and
assume no obligation to do so, and subject to the limitations, qualifications,
exceptions and assumptions hereinafter set forth, we are of the opinion, as of
the date hereof, that under the federal laws of the United States and the laws
of the States of Indiana and New York (assuming the law of New York is the same
as the law of the State of Indiana:
(i) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Indiana, with
all requisite corporate power and authority to own, lease and operate
its properties and to conduct its business as it is currently being
conducted and as described in the Offering Memorandum, and is duly
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 3
qualified and in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the ownership, leasing and
operation of its property and the conduct of its business requires such
qualification.
(ii) the authorized, issued and outstanding capital stock of
the Company has been duly and validly authorized and issued and is
fully paid and nonassessable.
(iii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Purchase Agreement and the other Operative Documents to which it is a
party and to consummate the transactions contemplated hereby or
thereby, including, without limitation, the corporate power and
authority to issue, sell and deliver the Senior Subordinated Notes, the
Preferred Securities Company Guarantee, the Exchange Notes and the
Exchange Preferred Securities Company Guarantee.
(iv) This Agreement has been duly and validly authorized,
executed and delivered by the Company.
(v) The Indenture has been duly and validly authorized,
executed and delivered by the Company and the Indenture constitutes a
legally valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as the enforceability
thereof may be subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general
equitable principles (whether considered in a proceeding in equity or
at law).
(vi) The Senior Subordinated Notes have been duly and validly
authorized by the Company and when the Senior Subordinate Notes are
issued and authenticated in accordance with the terms of the Indenture
and delivered against payment therefor in accordance with the terms
hereof, the Senior Subordinated Notes will be the legally valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Indenture, except as the enforceability thereof may be subject to the
effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 4
or at law). The Senior Subordinated Notes, when issued, authenticated
and delivered, will conform to the description thereof in the Offering
Memorandum.
(vii) The Exchange Notes have been duly and validly authorized
by the Company, and when the Exchange Notes are issued and
authenticated in accordance with the terms of the Indenture and the
Registration Rights Agreement, the Exchange Notes will be the legally
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of
the Indenture, except as the enforceability thereof may be subject to
the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law). The Exchange
Notes, when issued, authenticated and delivered, will conform to the
description thereof in the Offering Memorandum.
(viii) The Preferred Securities Company Guarantee has been
duly and validly authorized by the Company and when the Preferred
Securities Company Guarantee is issued and authenticated in accordance
with the terms of the Declaration and delivered against payment
therefor in accordance with the terms hereof, the Preferred Securities
Company Guarantee will be a legally valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and general equitable principles (whether considered
in a proceeding in equity or at law). The Preferred Securities Company
Guarantee, when issued, authenticated and delivered, will conform to
the description thereof in the Offering Memorandum.
(ix) The Exchange Preferred Securities Company Guarantee has
been duly and validly authorized by the Company, and when the Exchange
Preferred Securities Company Guarantee is issued and authenticated in
accordance with the terms of the Declaration and the Registration
Rights Agreement, the Exchange Preferred Securities Company Guarantee
will be a legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms and
entitled to the benefits of the Indenture, except as the enforceability
thereof may be subject to the effects of bankruptcy, insolvency,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 5
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general
equitable principles (whether considered in a proceeding in equity or
at law). The Exchange Preferred Securities Company Guarantee, when
issued, authenticated and delivered, will conform to the description
thereof in the Offering Memorandum.
(x) The Registration Rights Agreement has been duly and
validly authorized, executed and delivered by the Company and the
Registration Rights Agreement constitutes a legally valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be
subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law) and
except that any rights to indemnity and contribution thereunder may be
limited by federal and state securities laws or by considerations of
public policy. The Registration Rights Agreement conforms to the
description thereof in the Offering Memorandum.
(xi) The execution, delivery and performance by the Company of
the Purchase Agreement, the Guarantor Agreements and the other
Operative Documents to which it is a party, the issuance and sale of
the Securities and the Exchange Securities, and the consummation of the
transactions contemplated hereby and thereby, will not violate,
conflict with or constitute a breach of any of the terms or provisions
of, or be a default under (or an event that with notice or the lapse of
time, or both, would constitute a default), or require consent under
(other than those that have been or will be obtained prior to the
Closing Date), or result in the imposition of a lien or encumbrance on
any properties of the Company or any of its subsidiaries, or an
acceleration of indebtedness pursuant to, (i) the charter or bylaws or
other organizational documents of the Company or any of its
subsidiaries, (ii) to our knowledge, any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which any
of them or their property is or may be bound, (iii) any United States
federal or State of Indiana statute, rule or regulation applicable to
the Company, any of its subsidiaries or any of their assets or
properties, or (iv) to our knowledge, any judgment, order or decree of
any United States federal or State of Indiana court or United States
federal or State of Indiana governmental agency or authority having
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 6
jurisdiction over the Company, any of its subsidiaries or their assets
or properties except insofar as any of (ii), (iii) or (iv) above would
not reasonably be expected, individually or in the aggregate, to result
in a Material Adverse Effect. No consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of
or with, any United States federal or State of Indiana court or
governmental agency, body or administrative agency is required for the
execution, delivery and performance of this Agreement and the other
Operative Documents and the consummation of the transactions
contemplated hereby and thereby, except such as have been obtained and
made (or, in the case of the Registration Rights Agreement, will be
obtained and made) under the Securities Act, the Trust Indenture Act,
and state securities or Blue Sky laws and regulations or such as may be
required by the NASD (assuming full and complete compliance by the
Initial Purchasers with the agreements and representations contained in
Section 5(b) of the Purchase Agreement and the related information
contained in the Offering Memorandum). As to such matters relating to
state securities or Blue Sky laws and regulations or as such may be
required by the NASD, we have relied upon the review of such matters by
your counsel and the advice to you by your counsel. To our knowledge,
no consents or waivers from any other person are required for the
execution, delivery and performance of this Agreement and the other
Operative Documents and the consummation of the transactions
contemplated hereby and thereby, other than such consents and waivers
as have been obtained (or, in the case of the Registration Rights
Agreement, will be obtained).
(xii) To our knowledge, no action has been taken and no
statute, rule or regulation or order has been enacted, adopted or
issued by any United States federal or State of Indiana governmental
agency that prevents the issuance of the Securities or Exchange
Securities; to our knowledge, no injunction, restraining order or order
of any nature by a United States federal or State of Indiana court of
competent jurisdiction has been issued that prevents the issuance of
the Securities or Exchange Securities or suspends the sale of the
Securities or Exchange Securities in any jurisdiction referred to in
Section 4(e) of the Purchase Agreement; and to our knowledge, no
action, suit or proceeding is pending against or affecting or
threatened against the Company or any of its subsidiaries before any
United States federal or State of Indiana court or arbitrator or any
governmental body, agency or official which is reasonably likely to
have a Material Adverse Effect; and, to our knowledge, every request of
any securities authority or agency of any jurisdiction for additional
information has been complied with in all material respects.
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 7
(xiii) When the Securities are issued and delivered pursuant
to this Agreement, the Declaration and the Indenture, none of the
Securities will be of the same class (within the meaning of Rule 144A
under the Securities Act) as securities of the Company that are listed
on a national securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(xiv) Assuming the accuracy of the Initial Purchasers'
representations and warranties contained in Section 5(b) of the
Purchase Agreement and the compliance by the Initial Purchasers with
the agreements contained in such Section 5(b), no registration of the
Securities under the Securities Act, and no qualification of the
Indenture is required under the Trust Indenture Act, is required for
the sale of the Securities to you as contemplated hereby or for the
Exempt Resales solely in the manner contemplated by this Agreement, the
Declaration, the Indenture and the Offering Memorandum.
(xv) Neither the Trust, the Company nor any of its
subsidiaries is (i) an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company
Act and regulations, or (ii) a "holding company" or a "subsidiary
company" or an "affiliate" of a holding company within the meaning of
the Public Utility Holding Act of 1935, as amended.
(xvi) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement
thereto, as of its date (except for the financial statements, including
the notes thereto, and the supporting schedules and appendices and
other financial, statistical and accounting data included therein or
omitted therefrom, as to which no opinion need be expressed), contains
all the information specified in, and meeting the requirements of, Rule
144A(d)(4) under the Securities Act.
(xvii) The statements made in the Offering Memorandum under
the captions "Description of the Preferred Securities," "Description of
the Senior Subordinated Notes," "Relationship Among the Preferred
Securities, the Senior Subordinated Notes and the Preferred Securities
Company Guarantee" and "Plan of Distribution" (except those matters set
forth in the second paragraph of Section 6(c) of the Purchase
Agreement), insofar as they purport to constitute summaries of certain
contracts, agreements or documents,
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 8
constitute accurate summaries of such contracts, agreements or
documents in all material respects.
For purposes of rendering the opinions contained in paragraphs (v),
(vi), (vii), (viii), (ix) and (x) above, we have no reason to believe that any
provision of New York law would render any of the documents referred to in such
paragraphs unenforceable in any material respect (subject to each of the other
assumptions and qualifications contained in such opinion), assuming that New
York law is the same as Indiana law, and that we have no reason to believe that
New York law is different from Indiana law (it being understood that no member
of our firm is licensed to practice law in the State of New York).
We have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Initial Purchasers and their
counsel in connection with the preparation of the Preliminary Offering
Memorandum and the Offering Memorandum and have considered the matters required
to be stated therein and the statements contained therein and, although we have
not independently verified the accuracy, completeness or fairness of such
statements (except as indicated above), we advise you that, on the basis of the
foregoing, no facts have come to our attention that caused us to believe that
the Preliminary Offering Memorandum or the Offering Memorandum (as amended or
supplemented, if applicable), at the time such Preliminary Offering Memorandum
or Offering Memorandum were circulated or at the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, we further state that we assume no
responsibility for, and have not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and schedules and
other financial data included in the Preliminary Offering Memorandum or the
Offering Memorandum or any amendment or supplement thereto or the statements
made in the second paragraph of Section 6(c) of the Purchase Agreement.
The opinions contained herein are rendered to you at the request of the
Company.
The foregoing opinion is subject to the following additional
limitations, qualifications, exceptions and assumptions:
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 9
(a) Our opinion is based solely on the laws of the States of
New York (assuming the law of New York is the same as the law of the
State of Indiana), Indiana and United States federal law, and we
express no opinion as to matters governed or affected by the laws of
other states or as to the effect of the governing law provisions in the
Operative Documents. All documents opined to hereunder are to be
construed under New York law without regard to conflict of law
provisions which might be contained in such documents. We express no
opinion with respect to the enforceability of any provision which
requires that New York law be applied in connection with the validity
or enforceability of any of the documents opined to hereunder.
(b) We have relied upon information, certificates and
representations made by representatives of the Company and copies of
documents and records furnished to us by the Company and others, and,
for purposes of this opinion, we have assumed that all such information
and copies are true, correct, complete, authentic and accurate and
remain unchanged as of the date hereof, and that all signatures are
genuine, that all persons executing the documents were of legal age and
had the legal capacity to do so, and said matters have not been
independently verified by us. We have also assumed authenticity of the
originals of all documents submitted to us as copies.
(c) We express no opinion as to the status of title to any
property, real or personal, which is the subject matter of the
Operative Documents or as to the relative rights, interests and
priorities of the various parties who have or claim any interest in any
such property.
(d) The opinions expressed herein are based upon certain dated
certificates and certified copies described herein, and we assume that
no act or event has occurred between the dates thereof and the date
hereof which would in any way affect any of the matters opined upon
herein or which would in any manner alter any of said certificates or
certified copies. To our knowledge, no such act or event has occurred.
(e) This opinion is limited to the matters expressly stated
herein, and no opinion is inferred or may be implied beyond the matters
expressly stated. This opinion does not constitute a guarantee of
payment, performance or collectability of the aforesaid notes,
securities or documents of any of the obligations or other matters
referred to or opined
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 10
upon herein, and by rendering this opinion we are not guaranteeing or
insuring the payment, performance or collectability said notes,
securities or documents or any of the obligations or other matters
referred to or opined upon herein. We shall have no continuing
obligations hereunder to inform you of changes in law or fact
subsequent to the date hereof or facts of which we become aware after
the date hereof.
(f) The term "enforceable" as used herein or as referred to in
any other Operative Document not specifically referred to herein (i) is
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws as from time to time are in
effect affecting the enforcement of rights of creditors' generally, and
(ii) shall not be deemed to include the availability to any person or
entity of the remedy of specific performance, injunctive relief or
other equitable remedies to the extent general principles of equity
make such remedies unavailable. The unavailability of these remedies
does not render the Operative Documents invalid as a whole, and there
exists in the Operative Documents, or pursuant to applicable law,
legally adequate remedies for the realization of the principal benefits
and/or security intended to be provided by the Operative Documents.
(g) We do not hereby express any opinion as to the strict
enforceability of each and every remedy and provision of the Operative
Documents. Certain rights, remedies and waivers contained in the
Operative Documents may be limited or rendered ineffective by
applicable state laws or judicial decisions governing such provisions,
but such laws and judicial decisions should not render the Operative
Documents invalid as a whole, and there exists in the Operative
Documents, or pursuant to applicable law, legally adequate remedies for
the realization of the principal benefits and/or security intended to
be provided by the Operative Documents.
(h) The enforceability of the covenants and restrictions in
the Operative Documents against the Company may be limited or abrogated
if the party seeking enforcement fails to act in good faith and in a
commercially fair and reasonable manner in seeking to exercise and
enforce its rights and remedies thereunder and our opinion is subject
to the effects of the application of the principles of equity
(regardless of whether enforcement is considered in proceedings at law
or in equity) in regard to covenants or provisions in agreements where
the breach of such covenants or provisions
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 11
imposes restrictions or burdens and it cannot be demonstrated that the
enforcement of such restrictions and burdens is reasonably necessary
for such party's protection.
(i) We express no opinion as to the perfection or relative
priorities of any security interests or liens on any property of the
Company created by the Operative Documents or of any other security
interests or collateral that may be described or referred to in the
Operative Documents or the proceeds thereof.
(j) Any cognovit provisions contained in any of the Operative
Documents, under which the Company has waived service of process and
authorized confession of judgment, are void and unenforceable under
Indiana law assuming Indiana law applies. I.C. ss. 34-2-26-1.
Therefore, we cannot opine with any certainty as to the effect that the
existence of any cognovit provisions in the Operative Documents may
have on the enforceability of the Operative Documents under Indiana
law. We express no opinion as to the validity, legally binding effect
or enforceability of the waiver of rights and defenses contained in
Section 5.15 of the Indenture.
(k) In making our examination of the Operative Documents, we
have assumed that each party thereto, other than the Company, had full
power and authority to execute, deliver and perform all of its
obligations thereunder, and has duly authorized execution, delivery and
performance thereof by all necessary and proper action.
(l) We have assumed that sufficient consideration has been
given for the Operative Documents.
(m) Where there are no definitive court rulings, this opinion
is based upon our understanding of current interpretations of law.
(n) We have assumed that the facts and matters represented and
warranted by the Company in the Operative Documents are true and
correct and we have relied on these representations and warranties in
rendering this opinion.
(o) This firm has been engaged specifically to represent the
Company in connection with this transaction. We have represented the
Company in certain other matters; but we have not made inquiry of the
Company as to any other matters. Whenever
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
CIBC WOOD GUNDY SECURITIES CORP.
MESIROW FINANCIAL, INC.
SIMPSON THACHER & BARTLETT
September 16, 1997
Page 12
our opinion herein with respect to the existence or absence of facts is
intended to be based upon our knowledge or awareness or upon matters
known to us, it is intended to signify that during the course of our
limited representation of the Company, no information has come to our
attention which would give us actual knowledge of the existence or
absence of such facts. Except to the extent expressly set forth herein,
we have not undertaken any independent investigation to determine the
existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn
from our representation of the Company.
This opinion is rendered solely for the benefit of each of you, and may
not be relied upon by any other party, nor may copies be delivered to any other
person or filed with any governmental agency, without our prior written consent.
Yours truly,
/s/
DANN PECAR NEWMAN & KLEIMAN,
Professional Corporation
Exhibit 5.2
September 16, 1997
SIG Capital Trust I
c/o Symons International Group, Inc.
4720 Kingsway Drive
Indianapolis, Indiana 46205
Re: SIG Capital Trust I
-------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Symons International Group,
Inc. an Indiana corporation (the "Company"), and SIG Capital Trust I, a Delaware
business trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies of the
following:
(a) The Certificate of Trust of the Trust, dated as of August 4, 1997
(the "Certificate"), as filed in the office of the Secretary of State of
the State of Delaware (the "Secretary of State") on August 4, 1997;
(b) The Declaration of Trust of the Trust, dated as of August 4, 1997,
by and among the Company and the Trustees of the Trust named therein;
<PAGE>
SIG Capital Trust I
September 16, 1997
Page 2
(c) The Amended and Restated Declaration of Trust of the Trust, dated
as of August 12, 1997 (including Exhibits A, C and D thereto) (the
"Declaration"), among the Company as sponsor, the trustees of the Trust
named therein, and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust;
(d) The Registration Statement on Form S-4 (the "Registration
Statement"), including a preliminary prospectus (the "Prospectus"),
relating to the 9 1/2% Trust Preferred Securities of the Trust representing
undivided beneficial interests in the assets of the Trust (each, an
"Exchange Preferred Security") and collectively, the "Exchange Preferred
Securities"), as proposed to be filed by the Company and the Trust with the
Securities and Exchange Commission on or about September 16, 1997; and
(e) A Certificate of Good Standing for the Trust, dated September
16, 1997 obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are used
as defined in the Declaration.
For purposes of this opinion, we hae not reviewed any documents other than
the documents listed in paragraphs (a) through (e) above. In particular, we have
not reviewed any document (other than the documents listed in paragraphs (a)
through (e) above) that is referred to in or incorporated by reference into the
documents reviewed by us. We have assumed that there exists no provision in any
document that we have not reviewed that is inconsistent with the opinions stated
herein. We have conducted no independent factual investigation of our own but
rather have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Declaration
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, including with respect to the creation. operation and
termination of the Trust, and that the Declaration and the Certificate are in
full force and effect and have not been amended, (ii) except to the extent
provided in paragraph 1 below, the due
<PAGE>
SIG Capital Trust I
September 16, 1997
Page 3
creation or due organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents examined by us under
the laws of the jurisdiction governing its creation, organization or formation,
(iii) the legal capacity of natural persons who are parties to the documents
examined by us, (iv) that each of the parties to the documents examined by us
has the power and authority to execute and deliver, and to perform it
obligations under, such documents, (v) the due authorization, execution and
delivery by all parties thereto of all document examined by us, (vi) the receipt
by each Person to whom an Exchange Preferred Security is to be issued by the
Trust (collectively, the "Exchange Preferred Security Holders") of a Preferred
Securities Certificate and the consideration for the Exchange Preferred Security
acquired by it, in accordance with the Declaration and the Registration
Statement, and (vii) that the Exchange Preferred Securities are issued to the
Exchange Preferred Security Holders in accordance with the Declaration and the
Registration Statement. We have not participated in the preparation of the
Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware) and we have not considered and express
no opinion on the laws of any other jurisdiction, including federal laws and
rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
Based on the foregoing, and upon our examination of such questions of law
and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act.
2. The Exchange Preferred Securities will represent valid and, subject
to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.
3. The Exchange Preferred Security Holders, as beneficial owners of
the Trust, will be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under
the General Corporation Law of the State of Delaware.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement. In addition, we hereby
<PAGE>
SIG Capital Trust I
September 16, 1997
Page 4
consent to the use of our name under the Heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of Persons who consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
/s/
Richards, Layton & Finger
BJK/bjr
Exhibit 8
September 16, 1997
Symons International Group, Inc.
SIG Capital Trust I
4720 Kingsway Drive
Indianapolis, Indiana 46205
Ladies and Gentlemen:
We have acted as special tax counsel for Symons International Group, Inc.
(the "Company"), an Indiana corporation, and SIG Capital Trust I (the "Trust"),
a Delaware business trust, in connection with a Registration Statement on Form
S-4 filed with the Securities and Exchange Commission on or about September 16,
1997 (as amended through the date hereof, the "Registration Statement") which
registers Trust Preferred Securities (the "Exchange Preferred Securities") of
the Trust (liquidation amount of $1,000 per Preferred Securities). In
connection therewith, we have participated in the preparation of, and have
reviewed, the Registration Statement, including the prospectus (the
"Prospectus") and the form of prospectus supplement (the "Prospectus
Supplement") included therewith.
We have examined and relied upon the Registration Statement and, in each
case as filed with the Registration Statement, (i) the form of the Senior
Subordinated Indenture (the "Indenture") between SIG and Wilmington Trust
Company, as Trustee, which Indenture includes the form of the Exchange
Preferred Securities, to be used in connection with the issuance of the Senior
Subordinated Notes of the Company due 2027 (the "Exchange Notes"); (ii) the
Amended and Restated Declaration of Trust for the Trust (the "Declaration"),
(iii) the form of guarantee by SIG with respect to the Exchange Preferred
Securities (the "Exchange Guarantee"); and (iv) certain other relevant
documents used in connection with the issuance of the Exchange Notes, the
Exchange Preferred Securities and the Exchange Guarantee (collectively, the
"Operative Documents"). As to certain questions of fact material or relevant to
the opinions expressed herein, we have relied upon a certificate obtained from
an officer of the Company and have assumed the accuracy of the facts certified
or stated to us and have made no independent investigation of such facts and
assume no obligation to do so.
<PAGE>
SIG Capital Trust I
September 16, 1997
Page 2
Based on the foregoing and assuming that the Operative Documents are
executed and delivered in substantially the form filed as exhibits to the
Registration Statement and that the transactions contemplated to occur under the
Operative Documents in fact occur in accordance with the terms thereof, we
hereby confirm, in all material respects, that the discussions set forth in the
Prospectus Supplement under the heading "United States Federal Income Taxation"
is fair and accurate summary of the matters addressed therein, based upon
current law and the assumptions stated or referred to therein. There can be no
assurance that contrary positions may not be taken by the Internal Revenue
Service.
We hereby consent to the use of our name in the above-captioned
Registration Statement and to the filing of this opinion as Exhibit 8 to the
Registration Statement. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933. This opinion is expressed as of the date hereof,
unless otherwise expressly stated, and we disclaim any undertaking to advise
you of any subsequent changes of the facts stated or assumed herein or any
subsequent changes in applicable law.
Very truly yours,
/s/
Dann Pecar Newman & Kleiman
Professional Corporation
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
Wilmington Trust Company
August 12, 1997
Page 6
This opinion is rendered solely for the benefit of each of you, and may
not be relied upon by any other party, nor may copies be delivered to any other
person or filed with any governmental agency, without our prior written consent.
Yours truly,
DANN PECAR NEWMAN & KLEIMAN,
Professional Corporation
Exhibit 10
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into this _____
day of July, 1997 by and among Symons International Group, Inc., an Indiana
corporation ("SIG") and GS Capital Partners II, L.P., a Delaware limited
partnership ("GSCP"), GS Capital Partners Offshore, L.P., a Cayman Island
limited partnership ("Offshore"), Goldman, Sachs & Co. VerWaltung GmbH
("VerWaltung"), Stone Street Funds 1996, L.P., a Delaware limited partnership
("Stone Street") and Bridge Street Funds 1996, L.P., a Delaware limited
partnership ("Bridge Street") (Offshore, VerWaltung, Stone Street and Bridge
Street are collectively referred to as the "Affiliates").
WITNESSETH:
There are currently issued and outstanding 1,106,625 common shares
("Shares") of GGS Management Holdings, Inc., a Delaware corporation ("GGSM");
and
WHEREAS, SIG owns 575,445 Shares; and
WHEREAS, GSCP and the Affiliates own in the aggregate 531,180 Shares,
which are owned as follows:
Company Shares
- ------- ------
GS Capital Partners II, L.P. 333,277.8
GS Capital Partners Offshore, L.P. 132,491.7
Goldman Sachs & Co VerWaltung GmbH 12,292.6
Stone Street Funds 1996, L.P. 31,652.4
Bridge Street Funds 1996, L.P. 21,465.5
and;
WHEREAS, SIG desires to purchase, and GSCP and the Affiliates desire to
sell, the 531,180 Shares of GGSM currently owned in the aggregate by GSCP and
Affiliates; and
WHEREAS, the parties hereto have agreed that the aggregate purchase
price for such Shares shall be Sixty-One Million Dollars ($61,000,000.00) (the
"Purchase Price"); and
WHEREAS, GSCP understands and agrees that SIG intends to finance the
Purchase Price from the proceeds received by SIG from an offering of notes (the
"Note Financing"); and
-1-
<PAGE>
WHEREAS, the parties hereby agree that upon the completion of the
purchase of such Shares, the parties hereto shall relinquish all rights to any
and all prior agreements and understandings executed by the parties prior to the
date hereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and subject to the terms and conditions hereof, the
parties hereto agree as follows:
Section 1
Purchase of Shares
1.1 GSCP and the Affiliates hereby agree to sell, and SIG hereby agrees
to purchase, in the aggregate, Five Hundred Thirty-One Thousand, One Hundred
Eighty (531,180) Shares of GGSM ("The Stock") for the aggregate purchase price
of Sixty-One Million Dollars ($61,000,000.00).
1.2 Subject to Section 6 hereof, the closing of the purchase
contemplated herein (the "Closing") shall occur simultaneously with the closing
of the Note Financing; provided, however, that, should the Note Financing not
occur, SIG may, at its option, schedule the Closing at any time prior to
September 30, 1997 upon ten (10) days' advance written notice.
Section 2
Closing
2.1 At the Closing, SIG shall pay the Purchase Price to the account or
accounts which shall be designated by GSCP at least ten (10) days prior to the
Closing. GSCP and the Affiliates shall deliver The Stock at the Closing, duly
endorsed by GSCP or an Affiliate, as appropriate, transferring The Stock to SIG,
free and clear of all liens, encumbrances, pledges, voting agreements,
contractual rights or other claims of any nature whatsoever with respect to The
Stock.
Section 3
Representations and Warranties of GSCP
GSCP and the Affiliates, jointly and severally, represent and warrant
to SIG as follows:
3.1 GSCP and the Affiliates are duly organized, validly existing and in
good standing under the applicable laws of their jurisdiction of formation. GSCP
and the Affiliates have the requisite partnership or corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of, and the
performance by each of GSCP and the Affiliates of its obligations under this
Agreement have been duly and validly authorized by all necessary partnership or
corporate action, as appropriate, on the part of each of GSCP and the
Affiliates. No other corporate, shareholder or partnership approval on the part
of any of GSCP or the Affiliates is necessary for any of GSCP or the Affiliates
to enter into this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of GSCP and the Affiliates and constitutes its valid
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and binding obligations, enforceable against them in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar law affecting creditors' rights generally and subject to
the effect of general principles of equity.
3.2 At the Closing, GSCP and the Affiliates will deliver The Stock free
and clear of all liens, claims, demands and encumbrances whatsoever with respect
to the stock.
3.3 The execution and delivery of this Agreement by GSCP and the
Affiliates will not, and the consummation of the transactions contemplated by
this Agreement and the compliance with the terms, conditions and provisions of
this Agreement by GSCP and the Affiliates will not, (i) violate or conflict with
any provision of the articles of incorporation, bylaws, partnership agreements
or other organizing documents of GSCP or the Affiliates; or (ii) conflict with
or result in the breach or termination of, or otherwise give any contracting
party the right to change the terms of, or to terminate or accelerate the
maturity of, or constitute a default under the terms of, any indenture,
mortgage, loan or credit agreement or any other material agreement or instrument
to which any of GSCP and/or the Affiliates is a party or by which any of them or
any of their assets may be bound or affected, except to the extent that any of
the foregoing would not materially impact GSCP and its Affiliates' ability to
perform their obligations hereunder. Further, GSCP and the Affiliates represent
and warrant that the execution and delivery of this Agreement by GSCP and the
Affiliates will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the Shares or give to others
(other than SIG) any interest or rights therein.
3.4 GSCP and the Affiliates have not made any agreement or taken any
other action which might cause any person or entity to become entitled to a
broker's fee or commission as a result of the transactions contemplated in this
Agreement.
3.5 There are no actions, suits, investigations or proceedings of any
nature pending or, to the knowledge of GSCP and the Affiliates, threatened,
against GSCP or the Affiliates (x) affecting The Stock, or (y) that would be
reasonably likely to impair GSCP and the Affiliates' ability to consummate the
obligations hereunder, at law or in equity, by or before any court or
governmental department, agency or instrumentality.
3.6 GSCP and the Affiliates will deliver to SIG at the Closing good
title to The Stock. GSCP and the Affiliates will transfer The Stock to SIG at
the Closing free and clear of all claims, liens, demands and encumbrances
whatsoever with respect to the Stock.
3.7 GSCP and the Affiliates hereby agree that they will not, disclose
or reveal to any individual (other than to officers, directors, and employees of
GSCP and its affiliates), corporation, partnership, association, entity or
business, any proprietary or confidential technology, trade secret, confidential
information, data, processes, strategies, techniques, philosophies, software,
other proprietary intellectual property or other proprietary or confidential
information (collectively, "Confidential Information") used by SIG in any of its
businesses and GSCP and the Affiliates hereby agree that the Confidential
Information is the exclusive property of SIG and/or its subsidiaries.
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3.8 GSCP and the Affiliates have not, and hereby agree that, for three
years from the date hereof, they will not, directly (for themselves or others),
employ, offer employment to, or solicit the services of any current or future
employee of SIG or any subsidiary of SIG while such individual is in the employ
of SIG or any subsidiary of SIG.
Section 4
Representations and Warranties of SIG
SIG hereby represents and warrants to GSCP and the Affiliates as
follows:
4.1 SIG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana and SIG has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of,
and the performance by SIG of its obligations under, this Agreement have been
duly and validly authorized by all necessary corporate action on the part of
SIG. No other corporate or shareholder proceedings on the part of SIG are
necessary to approve this Agreement or consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by SIG
and constitutes SIG's valid and binding obligation, enforceable against SIG in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar law affecting creditors'
rights generally and subject to the effect of general principles of equity.
4.2 The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and the
compliance with the terms, conditions and provisions of this Agreement by SIG
will not, (i) violate or conflict with any provision of SIG's charter, articles
of incorporation, bylaws or other governing documents; or (ii) conflict with or
result in a breach or termination of, or otherwise give any contracting party
the right to change the terms of, or to terminate or accelerate the maturity of,
or constitute a default under the terms of, any indenture, mortgage, loan or
credit agreement or any other material agreement or instrument to which SIG or
any of its affiliates is a party or by which any of them or their assets are
bound, except to the extent that any of the foregoing would not materially
impact SIG's ability to perform its obligations hereunder.
4.3 The purchase by SIG of The Stock pursuant to this Agreement does
not require any consent, approval or authorization of, any governmental or
regulatory authority.
4.4 SIG has not made any agreement or taken any other action which
might cause anyone to become entitled to a broker's fee or commission as a
result of the transactions contemplated hereby.
4.5 There are no actions, suits, proceedings or investigations of any
nature pending, or to the knowledge of SIG, threatened, against SIG or any of
its affiliates and no other events have occurred or are reasonably likely to
occur, in each case which would be reasonably likely to materially impair SIG's
ability to consummate the Note Offering or perform its obligations hereunder.
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4.6 Neither SIG, nor any of its affiliates, has attempted to contact,
contacted, held discussions with, conducted negotiations with, or entered into
any agreement or undertaking (whether oral or written) with any party concerning
the sale, transfer or other disposal or potential sale, transfer or other
disposal of any of the shares of capital stock (whether by way of merger,
consolidation or otherwise) of GGSM, GGS Management, Inc., Superior Insurance
Company or Pafco General Insurance Company. Notwithstanding any other provision
of this Agreement, SIG shall only be responsible for the accuracy of this
representation up through and including the Closing.
Section 5
Cancellation of Agreements
5.1 The parties hereto agree that if the Closing occurs, all
Shareholder Agreements (as hereinafter defined) entered into between the parties
hereto prior to the date hereof shall become null, void and of no effect as of
the date of Closing. Such agreements include, but are not limited to, a Stock
Purchase Agreement dated as of January 31, 1996 and the three amendments
thereto, the Amended and Restated Stockholder Agreement dated as of November 8,
1996 including any and all amendments thereto, the Registration Rights Agreement
dated as of April 30, 1996 and any and all letter agreements between the parties
executed prior to the date hereof ("Shareholder Agreements").
Section 6
Conditions To Closing
6.1 The obligations of SIG to proceed with the Closing under this
Agreement are subject to the fulfillment prior to or at Closing of the following
conditions (any one or more of which may be waived in whole or in part by SIG at
SIG's option):
a. The representations and warranties of GSCP and the
Affiliates contained in this Agreement shall be true
and correct in all material respects on and as of the
date of Closing with the same force and effect as if
those representations and warranties had been made
on, or as of such time and SIG shall have received a
certificate to such effect signed by an authorized
officer, partner or other authorized signatory of
GSCP and the Affiliates.
b. GSCP and the Affiliates shall have performed in all
material respects all of the covenants and complied
with all of the provisions required by this Agreement
to be performed or complied with by them on or before
the Closing, and SIG shall have received a
certificate to such effect signed by an authorized
officer, partner or other authorized signatory of
GSCP and/or the Affiliates.
c. No order of any court or administrative agency shall
be in effect with enjoins or prohibits the
transactions contemplated hereby.
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d. GSCP and the Affiliates shall have delivered to SIG
copies, certified by the duly qualified and acting
Secretary, Assistant Secretary, partner or other
authorized signatory of GSCP and/or the Affiliates,
of resolutions adopted by the appropriate governing
body of GSCP and the Affiliates approving this
Agreement and the consummation of the transactions
contemplated hereby.
e. SIG shall have completed the Note Financing.
f. GSCP and the Affiliates shall execute such further
instruments of conveyance and transfer as SIG may
reasonably request to convey and transfer The Stock
to SIG.
g. GSCP and the Affiliates shall execute at Closing the
mutual general release in the form attached hereto as
Exhibit A and made a part hereof by reference.
6.2 The obligations of GSCP and the Affiliates to proceed with the
Closing under this Agreement are subject to the fulfillment prior to or at
Closing of the following conditions (any one or more of which may be waived in
whole or in part by GSCP at its option):
a. The representations and warranties of SIG contained
in this Agreement shall be true and correct in all
material respects (except that the representation
contained in Section 4.6 shall be true in all
respects) on and as of the time of Closing with the
same force and effect as those such representations
and warranties had been made on, as of and with
reference to such time, and GSCP and the Affiliates
shall have received a certificate to such effect
signed by an authorized officer of SIG.
b. SIG shall have performed in all material respects all
of the covenants and complied with all of the
provisions required by this Agreement to be performed
or complied by them on or before the Closing, and
GSCP and the Affiliates shall have received a
certificate to such effect signed by an authorized
officer of SIG.
c. SIG shall execute at Closing the mutual general
release in the form attached hereto as Exhibit A and
made a part hereof by reference.
Section 7
Indemnification
7.1 a. The parties hereto hereby each agree to indemnify,
defend and hold harmless the other from and against
any loss, liability, claim, action, obligation,
damage, deficiency, judgment, costs and expenses
(including reasonable attorneys' fees and expenses
incurred in the investigating, preparing or defending
any
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litigation or proceeding commenced or threatened)
("Damage") arising out of or resulting from any
misrepresentation, breach of warranty or non-
fulfillment of any covenant on the part of such party
as shall be contained in this Agreement
b. Following the Closing, SIG shall indemnify and
hold harmless GSCP and the Affiliates and each of the
officers, directors, employees, representatives and
agents of GSCP and the Affiliates, including the
present directors (each as "Indemnified Director")
of GGSM and its subsidiaries designated by GSCP
and/or the Affiliates (each of the foregoing,
including the Indemnified Directors, an
"Indemnified Party"), against all Damages suffered
by an Indemnified Party arising out of, relating to,
or resulting from, any claim, action, suit, pro-
ceeding or investigation arising out of, relating to,
or resulting from the fact that such Indemnified
Party or any of its affiliates, or any entity of or
for which is a director, officer, employee,
representative agent, was a shareholder or director
of GGSM and/or any of its subsidiaries. Without
limiting SIG's and its subsidiaries' obligations
pursuant to the prior sentence, SIG agrees that it
will cause GGSM to maintain in effect for a period of
three years following the Closing all rights to in-
demnification and all limitations of liability
existing as of the date hereof in favor of the In-
demnified Directors in GGSM's and its subsidiaries'
Certificates of Incorporation and Bylaws. SIG shall
use its best efforts to cause the Indemnified
Directors to be covered for a period of three years
after the Closing by the directors' and
officers' insurance policy currently maintained
by GGSM (provided that SIG may permit GGSM to sub-
stitute therefor policies of at lease the same
coverage and amount containing terms and conditions
which are not less advantageous to the Indemnified
Directors than the terms and conditions of such
existing policy) with respect to acts or omissions
which are or were committed by the Indemnified
Directors in their capacity as directors of GGSM.
7.2 Notwithstanding anything contained herein, no action or claim for
Damage resulting from any breach of the representations and warranties contained
herein shall be brought or made after December 31, 1998.
7.3 Any indemnification payment made pursuant to this Agreement shall
be increased by any federal, state, local or foreign tax liability actually
incurred, or expected with reasonable certainty to be incurred.
7.4 In addition to the rights otherwise granted by this Section 7, GSCP
and the Affiliates, on the one hand, and SIG on the other hand, agree that the
Damage caused by the breach by it of any of the provisions hereof will be
difficult to determine and monetary damages may not afford the other party a
full and adequate remedy for such breach, and therefore, each of the parties
agrees that the other party shall be entitled to an immediate injunction and
restraining order (without the necessity
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of a bond) to prevent any breach or any threatened or continued breach by such
party without the other party having to prove Damages, in addition to any other
remedies to which the other party may be entitled at law or in equity.
Section 8
Termination
8.1 This Agreement may be terminated or extended at any time by mutual
written consent of the parties hereto prior to September 30, 1997.
8.2 Unless earlier terminated in accordance with Section 8.1, this
Agreement will terminate on September 30, 1997 if the Closing has not yet
occurred.
8.3 In the event of termination of this Agreement as provided in this
Section 8, this Agreement shall forthwith terminate and there shall be no
liability on the part of any party or any party's officers or directors, expect
for liabilities arising from a breach of this Agreement prior to such
termination.
Section 9
Post-Closing Price Adjustment
9.1 In the event that, within one (1) year following the Closing, SIG
or any of its affiliates shall, in any transaction or series of related
transactions, directly or indirectly, sell, transfer or otherwise dispose of
(each a "Sale") GGSM, GGS Management, Inc. ("GGS") or Pafco General Insurance
Company ("Pafco") and Superior Insurance Company ("Superior"), or shall enter
into any agreement for the Sale of GGSM, GGS or Pafco and Superior (whether any
such Sale or contemplated Sale is by means of a merger, consolidation, or sale
of all or substantially all of the assets or shares of capital stock of GGSM or
GGS), the, upon the consummation of any such Sale, SIG shall pay to GSCP an
amount of cash equal to (such amount, the "Price Adjustment Amount") (a) 48% of
the total value of the highest amount of consideration received or to be
received by SIG or any of its affiliates in connection with such Sale, less
(b)(i) $61,000,000 plus (ii), if the Note Financing is consummated, the Daily
Interest Amount (as defined below) multiplied by the number of days that elapse
from the Closing through the date upon which SIG or any of its affiliates enters
into any agreement for any Sale subject to this Section 9.1. "Daily Interest
Amount" shall equal (x) $61,000,000, multiplied by (y) (a) the annual interest
payable by SIG in respect of the notes issued pursuant to the Note Financing (or
in respect of any notes issued in exchange for such notes) divided by, (b) 365.
9.2 Notwithstanding the provisions of Section 9.1 hereof, if the Price
Adjustment Amount is negative, SIG shall not be required to make any payment to
GSCP pursuant to this Section 9.
9.3 Notwithstanding any other provision of this Agreement, in no event
shall SIG be required to pay to GSCP pursuant to this Section 9 an amount in
excess of $5,000,000.
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<PAGE>
Section 10
Miscellaneous
10.1 Each of the parties hereto agrees to use all commercially
reasonable efforts to take, or cause to be taken, all reasonable actions and to
do, or cause to be done, all reasonable things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement. None of the parties
hereto will take or permit to be taken (by any entity that they control) any
action that would be in breach of the terms or provisions of this Agreement or
that would cause any of the representations contained herein to be or become
untrue. In addition, SIG shall use commercially reasonable efforts to cause the
Note Financing to be consummated prior to September 30, 1997.
10.2 Whether or not the Closing occurs, subject to Section 7, except as
otherwise stated or hereinafter agreed, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense. It is specifically agreed that,
subject to Section 7, SIG shall not be responsible for the legal, accounting or
other professional fees incurred by GSCP relating to this Agreement, its
execution or the Closing.
10.3 At Closing, GSCP will deliver written resignations of Sanjay H.
Patel and Michael A. Pruzan (or any designated successor thereto) from the Board
of Directors of GGSM, GGS Management, Inc., Superior Insurance Company, Superior
American Insurance Company, Superior Guaranty Insurance Company, Standard Plan,
Inc. and Pafco General Insurance Company.
10.4 The content and timing of any press release or other public
announcement proposed to be made concerning the transactions contemplated by
this Agreement must be consented to in advance by each party, which consents
shall not be unreasonably withheld or delayed. Except in connection with any
press release or other public announcement made pursuant to the prior sentence,
SIG shall not, and shall not permit any of its affiliates to, issue any press
release or make any other public statement which makes any reference to GSCP,
its affiliates, or "Goldman Sachs," without the prior consent of GSCP
10.5 Subject to Section 7.2 hereof, the representations, warranties,
covenants and agreements of the purchasers and sellers contained in this
Agreement shall survive the Closing and shall not merge in the performance of
any obligation by any party hereto.
10.6 This Agreement may not be amended or modified without the prior
written consent of all parties.
10.7 Failure to insist upon strict compliance with any of the terms or
conditions to this Agreement at any one time shall not be deemed a waiver of
such term or condition at any other time, nor shall any waiver or relinquishment
of any right or power granted herein at any time be deemed a waiver or
relinquishment of the same or any other right or power at any other time.
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10.8 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the principles
of conflicts of laws. Each of the parties hereto irrevocably and unconditional
consents to submit to the exclusive jurisdiction of the courts of the United
States of America located in the County of New York, for any action, proceeding
or investigation in any court or before any governmental authority
("Litigation") arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in this Agreement shall be effective service of process for any Litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditional waives any objection to the laying of venue of any
Litigation arising out of this Agreement or the transactions contemplated hereby
in the courts of the United States of America located in the County of New York,
and hereby further irrevocably and unconditional waives and agrees not to plead
or claim in any such court that any such Litigation brought in any such court
has been brought in an inconvenient forum.
10.9 Any notice or other communication to be given hereunder shall be
in writing and shall be deemed sufficient when:
a. mailed by United States Certified Mail, Return
Receipt Requested;
b. mailed by overnight express mail;
c. sent by facsimile or telecopy machine, followed by
confirmation mailed by First Class Mail or overnight
express mail; or
d. delivered in person, at the address set forth below,
or such other address as a party may provide to the
other in accordance with the procedure for notice as
set forth in this Section.
If to: Symons International Group, Inc.:
David L. Bates, Esq.
Vice President, General Counsel and Secretary
4720 Kingsway Drive
Indianapolis, Indiana 46205
Telephone: 317 259-6384
Facsimile: 317 259-6395
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If to: GSCP
Michael A. Pruzan
Goldman Sachs & Co.
85 Broad Street
New York, New York 10004
Telephone: 212 902-9123
Facsimile: 212 357-0926
Copy to:
Gail Weinstein, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telephone: 212 859-8000
Facsimile: 212 859-8585
10.10 If any provision of this Agreement shall be determined to be
invalid or unenforceable, this Agreement shall be deemed amended to delete such
provision and the remainder of this Agreement shall be enforceable by this
terms.
10.11 This Agreement may not be assigned or delegated by any party
without the prior written consent of all other parties.
10.12 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
10.13 Each party agrees to execute and deliver all such documents and
agreements and to take all further acts as may be reasonably necessary or
appropriate to effectuate this Agreement.
10.14 Headings and captions contained in this Agreement are inserted
only as a matter of convenience and for reference and in no way define, limit,
extend or prescribe the scope of this Agreement or the intent of any provision.
10.15 The masculine gender shall include the feminine and neuter
genders and the singular shall include the plural.
10.16 This Agreement constitutes the entire agreement of the parties
with respect to the matters set forth herein and supersedes any and all prior
understandings or agreements, oral or written, with respect to such matters.
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10.17 Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against any party hereto, whether under any rule
of construction or otherwise. No party shall be considered the draftsman. On the
contrary, this Agreement has been reviewed, negotiated and accepted by all
parties and their lawyers and shall be construed and interpreted according to
the ordinary meaning of the words used so as to fairly accomplish the purposes
and intentions of all parties hereto.
10.18 This Agreement may be executed in any number of counterparts,
each of which shall be an original, and all such counterparts shall constitute
one in the same Agreement, binding on all the parties notwithstanding that all
the parties are not signatories to the same counterpart.
10.19 This Agreement is for the sole benefit of the parties hereto and
shall be construed to grant legal or equitable rights only to the parties
hereto.
10.20 The preambles contained herein above are incorporated herein by
reference as though repeated verbatim.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
SYMONS INTERNATIONAL GROUP, INC.
By:__/s David L. Bates_________________
Name: David L. Bates
Title: Vice President, General
Counsel & Sec.
GS CAPITAL PARTNERS II, L.P.
By: GS Advisors, L.P.
Its general partner
By: GS Advisors, Inc.
Its general partner
By:__/s/ C.H. Skodinski________________
Name: C.H. Skodinski, V.P.
Title:
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<PAGE>
Stock Purchase Agreement cont. . . . . .
GS CAPITAL PARTNERS OFFSHORE, L.P.
By: GS Advisors II (Cayman), L.P.
Its general partner
By: GS Advisors II, Inc.
Its general partner
By:__/s/ C.H. Skodinski_______________
Name:
Title: C.H. Skodinski, V.P.
GOLDMAN SACHS & CO. VerWaltung GmbH
By:__/s/ Joseph H. Glemberman_________
Name: JOSEPH H. GLEBERMAN
Title: MANAGING DIRECTOR
and
By:__/s/ C.H. Skodinski______________
Name:
Title: C.H. Skodinski, Reg. Agent
STONE STREET FUNDS 1996, L.P.
By: Stone Street Empire, Corp.,
Its general partner
By:__/s/ C.H. Skodinski_______________
Name:
Title: C.H. Skodinski, V.P.
BRIDGE STREET FUNDS 1996, L.P.
By: Stone Street Empire, Corp.,
Its general partner
By:__/s/ C.H. Skodinski_______________
Name:
Title: C.H. Skodinski, V.P.
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<PAGE>
Exhibit A
MUTUAL GENERAL RELEASE
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, SIG and GSCP and the Affiliates, jointly and
severally, for themselves and their respective successors and assigns, hereby
fully release and discharge each other and all entities and persons related to
or affiliated with them, from all liabilities, contingent or otherwise, which
Goran, SIG, its direct and indirect subsidiaries, or GSCP and the Affiliates, or
any related or affiliated entities have against the other party with respect to
any and all claims, demands, liabilities or costs or other expenses or
liabilities incurred pursuant to the Shareholder Agreements, including any and
all other expenses or liabilities of a non-recurring nature incurred pursuant to
the Shareholder Agreements.
None of the terms or provisions of this Mutual General release may be
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the parties hereto. This Mutual General Release shall be
binding upon the undersigned and their respective parties hereto. This Mutual
General Release shall be governed by and shall be construed and interpreted in
accordance with, the internal laws of the State of Indiana, without reference to
principles of conflict of laws.
All defined terms used herein shall have the same meaning as is
ascribed in the Stock Purchase Agreement to which this Mutual General Release is
an Exhibit.
IN WITNESS WHEREOF, the undersigned have executed this Mutual General
Release effective this _23rd_ day of ___July__________, 1997.
SYMONS INTERNATIONAL GROUP, INC.
By:__/s/ David L. Bates_______________
Name: David L. Bates
Title: Vice President, Gen. Counsel &
Sec.
GORAN CAPITAL INC.
By:__/s/ David L. Bates_______________
Name: David L. Bates
Title: Vice President, Gen. Counsel &
Sec.
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Exhibit A
Mutual General Release cont. . . . . .
GS CAPITAL PARTNERS II, L.P.
By: GS Advisors, L.P.
Its general partner
By: GS Advisors, Inc.
Its general partner
By:__/s/ C.H. Skodinski_______________
Name:
Title: C.H. Skodinski, V.P.
GS CAPITAL PARTNERS OFFSHORE, L.P.
By: GS Advisors II (Cayman), L.P.
Its general partner
By: GS Advisors II, Inc.
Its general partner
By:__/s/ C.H. Skodinski_______________
Name:
Title: C.H. Skodinski, V.P.
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Exhibit A
Mutual General Release cont. . . . . .
GOLDMAN SACHS & CO. VerWaltung GmbH
By:__/s/ Joseph H. Gleberman__________
Name: JOSEPH H. GLEBERMAN
Title: MANAGING DIRECTOR
and
By:__/s/ C.H. Skodinski_______________
Name:
Title: C.H. Skodinski, Reg Agent
STONE STREET FUNDS 1996, L.P.
By: Stone Street Empire, Corp.,
Its general partner
By:__/s/ C.H. Skodinski_______________
Name:
Title: C.H. Skodinski, V.P.
BRIDGE STREET FUNDS 1996, L.P.
By: Stone Street Empire, Corp.,
Its general partner
By:__/s/ C.H. Skodinski_______________
Name:
Title: C.H. Skodinski, V.P.
-16-
Exhibit 12.1
<TABLE>
SYMONS INTERNATIONAL GROUP, INC.
Computation of the Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
For the Years Ended December 31, 1992, 1993, 1994, 1995 and 1996
and for the Six Months Ended June 30, 1997 and 1996
(dollars in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
December December December December December June 30, June 30,
31, 1992 31, 1993 31, 1994 31, 1995 31, 1996 1996 1997
-------- -------- -------- -------- -------- ---- ----
Earnings (loss) before
income taxes and
interest costs $ 2,263 $ (310) $ 2,569 $ 8,688 $ 27,641 $ 7,331 $ 20,073
Amortization of
deferred debt costs $ --- $ --- $ --- $ --- $ 154 $ 39 $ 116
------- -------- -------- --------- -------- -------- --------
$ 2,263 $ (310) $ 2,569 $ 8,688 $ 27,795 $ 7,370 $ 20,189
------- -------- -------- --------- -------- -------- --------
Interest costs $ 459 $ 996 $ 1,184 $ 1,248 $ 3,938 $ 1,261 $ 2,744
Amortization of
deferred debt costs $ --- $ --- $ --- $ --- $ 154 $ 39 $ 116
-------- -------- --------- --------- -------- -------- --------
$ 459 $ 996 $ 1,184 $ 1,248 $ 4,092 $ 1,300 $ 2,860
-------- ------- -------- -------- -------- -------- --------
Ratio of earnings to
fixed charges 4.93 (0.31) 2.17 6.96 6.79 5.67 7.06
==== ====== ==== ==== ==== ==== ====
</TABLE>
Exhibit 21
SYMONS INTERNATIONAL
GROUP, INC.
-----------
|
|
------100%----------------|-------100%----------------|
| (crop insurance) (nonstandard automobile |
| insurance) |
IGF Holdings, Inc. GGS Management
------------------ Holdings, Inc.
| --------------
| |
| |
| |
IGF Insurance Company GGS Management, Inc.
--------------------- --------------------
|
|
|
|------------------------------------|
| |
| |
Pafco General Superior Insurance
Insurance Company Company
----------------- -------
|
|
|
|---------------------------|
| |
Superior American Superior Guaranty
Insurance Company Insurance Commpany
----------------- ------------------
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement of Symons
International Group, Inc. on Form S-4 (File No. 333-_________), of our report
dated March 21, 1997 and our report dated June 14, 1996, on our audits of the
consolidated financial statements and financial statement schedules of Symons
International Group, Inc. and Superior Insurance Company, Inc., respectively. We
also consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
September 15, 1997
Exhibit 24
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
15th day of September, 1997.
/s/ G. Gordon Symons
G. Gordon Symons
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
_____ day of September, 1997.
------------------------------------------
James G. Torrance, Q.C.
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
12th day of September, 1997.
/s/ John K. McKeating
John K. McKeating
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
15th day of September, 1997.
/s/ David R. Doyle
David R. Doyle
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
12th day of September, 1997.
/s/ Jerome B. Gordon
Jerome B. Gordon
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
12th day of September, 1997.
/s/ Douglas H. Symons
Douglas H. Symons
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
12th day of September, 1997.
/s/ Robert C. Whiting
Robert C. Whiting
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
15th day of September, 1997.
/s/ David L. Bates
David L. Bates
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
15th day of September, 1997.
/s/ Gary P. Hutchcraft
Gary P. Hutchcraft
<PAGE>
POWER OF ATTORNEY
The undersigned hereby appoints Alan G. Symons, David L. Bates and Gary P.
Hutchcraft, and each of them, any of whom may act without the joinder of the
others, as his attorney-in-fact to sign on his behalf, in any and all
capacities, the Registration Statement to which this Power of Attorney is an
exhibit and to file the Registration Statement and all amendments and
post-effective amendments to the Registration Statement and to file the same
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each said attorney-in-fact lawfully does or causes to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
16th day of September, 1997.
/s/ Alan G. Symons
Alan G. Symons
Exhibit 25.1
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SYMONS INTERNATIONAL GROUP, INC.
(Exact name of obligor as specified in its charter)
Indiana 35-1707115
(State of incorporation) (I.R.S. employer identification no.)
4720 Kingsway Drive
Indianapolis, Indiana 46205
(Address of principal executive offices) (Zip Code)
Senior Subordinated Notes of Symons International Group, Inc.
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 8th day
of September, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
- ------------------------------ -----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington, County
of New Castle; the name of its resident agent is Wilmington Trust
Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains and
operates branch offices in the City of Newark, New Castle County,
Delaware, the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New
Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or
agencies of the government of the State of Delaware empowered to
confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to
the same extent as natural persons might or could do and in any part
of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual
3
<PAGE>
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on
5
<PAGE>
any other class or classes, or series of the same or other
class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock
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<PAGE>
may be issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time by vote of a majority of
the whole Board, provided, however, that the number of directors shall
not be reduced so as to shorten the term of any director at the time
in office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
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vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
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Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered
for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article Fifteenth shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such
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business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) shall be required
to amend, alter or repeal any provision of Articles Fifth, Thirteenth,
Fifteenth or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
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ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations
as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such
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<PAGE>
implementary Resolutions shall be suspended during such a disaster period until
it shall be determined by any interim Executive Committee acting under this
section that it shall be to the advantage of the Company to resume the conduct
and management of its affairs and business under all of the other provisions of
these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
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(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
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<PAGE>
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables
6
<PAGE>
of the Company and for the keeping of proper records of the evidence of property
or indebtedness and of all the transactions of the Company. He shall have
general supervision of the expenditures of the Company and shall report to the
Board of Directors at each regular meeting of the condition of the Company, and
perform such other duties as may be assigned to him from time to time by the
Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary
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<PAGE>
or Treasurer or an Assistant Secretary, and the seal of the corporation shall be
engraved thereon. Each certificate shall recite that the stock represented
thereby is transferrable only upon the books of the Company by the holder
thereof or his attorney, upon surrender of the certificate properly endorsed.
Any certificate of stock surrendered to the Company shall be cancelled at the
time of transfer, and before a new certificate or certificates shall be issued
in lieu thereof. Duplicate certificates of stock shall be issued only upon
giving such security as may be satisfactory to the Board of Directors or the
Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any
8
<PAGE>
and all deeds, conveyances, assignments, releases, contracts, agreements, bonds,
notes, mortgages and all other instruments incident to the business of this
Company or in acting as executor, administrator, guardian, trustee, agent or in
any other fiduciary or representative capacity by any and every method of
appointment or by whatever person, corporation, court officer or authority in
the State of Delaware, or elsewhere, without any specific authority,
ratification, approval or confirmation by the Board of Directors or the
Executive Committee, and any and all such instruments shall have the same force
and validity as though expressly authorized by the Board of Directors and/or the
Executive Committee.
9
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
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<PAGE>
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
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EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 8, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
------------------------ ----------
Name of Bank
City
in the State of DELAWARE , at the close of business on June 30, 1997.
--------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins................ 208,942
Interest-bearing balances.......................................... 0
Held-to-maturity securities.......................................... 403,700
Available-for-sale securities........................................ 905,200
Federal funds sold and securities purchased under
agreements to resell................................................. 151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income........ 3,816,484
LESS: Allowance for loan and lease losses...... 54,535
LESS: Allocated transfer risk reserve.......... 0
Loans and leases, net of unearned income, allowance, and reserve... 3,761,949
Assets held in trading accounts...................................... 0
Premises and fixed assets (including capitalized leases)............. 95,762
Other real estate owned.............................................. 1,751
Investments in unconsolidated subsidiaries and associated companies.. 42
Customers' liability to this bank on acceptances outstanding......... 0
Intangible assets.................................................... 3,572
Other assets......................................................... 108,295
Total assets......................................................... 5,640,913
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices.................................................. 3,864,774
Noninterest-bearing .......................... 875,081
Interest-bearing.............................. 2,989,693
Federal funds purchased and Securities sold under agreements
to repurchase........................................................ 337,784
Demand notes issued to the U.S. Treasury............................. 95,000
Trading liabilities (from Schedule RC-D)............................. 0
Other borrowed money:................................................ ///////
With original maturity of one year or less........................ 775,000
With original maturity of more than one year...................... 43,000
Bank's liability on acceptances executed and outstanding............. 0
Subordinated notes and debentures.................................... 0
Other liabilities (from Schedule RC-G)............................... 84,197
Total liabilities.................................................... 5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus........................ 0
Common Stock......................................................... 500
Surplus (exclude all surplus related to preferred stock)............. 62,118
Undivided profits and capital reserves............................... 376,212
Net unrealized holding gains (losses) on available-for-sale
securities........................................................... (2,328)
Total equity capital................................................. 441,158
Total liabilities, limited-life preferred stock, and equity capital.. 5,640,913
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is Wilmington
Trust Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for
<PAGE>
money, to buy gold and silver bullion and foreign coins, to
buy and sell bills of exchange, and generally to use,
exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or
necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
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<PAGE>
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as
it may think fit and proper, and from time to time to vary
or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase,
3
<PAGE>
hold, sell, assign, transfer, pledge, mortgage and convey
real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
4
<PAGE>
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which,
5
<PAGE>
and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe
6
<PAGE>
for any unissued stock of any class or series or any additional
shares of any class or series to be issued by reason of any increase
of the authorized capital stock of the Corporation of any class or
series, or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time
7
<PAGE>
by vote of a majority of the whole Board, provided, however, that
the number of directors shall not be reduced so as to shorten the
term of any director at the time in office, and provided further,
that the number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice,
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(ii) the principal occupation or employment of such nominee and
(iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
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entitled to vote generally in the election of directors (considered
for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that
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some lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to
any one or more of clauses (A) through (E) of paragraph 1 of
the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or
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otherwise, or (ii) the right to vote pursuant to any
agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter
or Act of Incorporation.
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Seventeenth: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
<PAGE>
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
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(B) The Executive Committee shall have all the powers of the Board
of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
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Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as
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the Board of Directors may from time to time confer and direct. He shall also
exercise such powers and perform such duties as may from time to time be agreed
upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of
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Directors at appropriate times a report relating to the general condition and
internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any
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dividend, or to any allotment or rights, or to exercise any rights in respect of
any change, conversion or exchange of capital stock, or in connection with
obtaining the consent of stockholders for any purpose, which record date shall
not be more than 60 nor less than 10 days proceeding the date of any meeting of
stockholders or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
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ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses under
applicable law.
9
<PAGE>
(D) The rights conferred on any person by this Article X shall not
be exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 8, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------- --------------
Name of Bank
City
in the State of DELAWARE , at the close of business on June 30, 1997.
--------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins............... 208,942
Interest-bearing balances......................................... 0
Held-to-maturity securities.......................................... 403,700
Available-for-sale securities........................................ 905,200
Federal funds sold and securities purchased under agreements
to resell......................................151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income. 3,816,484
LESS: Allowance for loan and lease losses. 54,535
LESS: Allocated transfer risk reserve. 0
Loans and leases, net of unearned income,
allowance, and reserve............................................ 3,761,949
Assets held in trading accounts...................................... 0
Premises and fixed assets (including capitalized leases)............. 95,762
Other real estate owned.............................................. 1,751
Investments in unconsolidated subsidiaries and associated companies.. 42
Customers' liability to this bank on acceptances outstanding......... 0
Intangible assets.................................................... 3,572
Other assets......................................................... 108,295
Total assets......................................................... 5,640,913
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices................................................. 3,864,774
Noninterest-bearing ........ 875,081
Interest-bearing. 2,989,693
Federal funds purchased and Securities sold under agreements
to repurchase................................. 337,784
Demand notes issued to the U.S. Treasury............................ 95,000
Trading liabilities (from Schedule RC-D)............................ 0
Other borrowed money:............................................... ///////
With original maturity of one year or less...................... 775,000
With original maturity of more than one year.................... 43,000
Bank's liability on acceptances executed and outstanding............ 0
Subordinated notes and debentures................................... 0
Other liabilities (from Schedule RC-G).............................. 84,197
Total liabilities................................................... 5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus........................ 0
Common Stock......................................................... 500
Surplus (exclude all surplus related to preferred stock)............. 62,118
Undivided profits and capital reserves............................... 376,212
Net unrealized holding gains (losses) on available-for-
sale securities...................................................... (2,328)
Total equity capital................................................. 441,158
Total liabilities, limited-life preferred stock, and
equity capital....................................................... 5,640,913
2
Exhibit 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SYMONS INTERNATIONAL GROUP, INC.
SIG CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Indiana 35-1707115
Applied For
(State of incorporation) (I.R.S. employer identification no.)
4720 Kingsway Drive
Indianapolis, Indiana 46205
(Address of principal executive offices) (Zip Code)
Trust Preferred Securities of SIG Capital Trust I
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 8th day
of September, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
- ------------------------------ -----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington, County
of New Castle; the name of its resident agent is Wilmington Trust
Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains and
operates branch offices in the City of Newark, New Castle County,
Delaware, the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New
Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or
agencies of the government of the State of Delaware empowered to
confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to
the same extent as natural persons might or could do and in any part
of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual
3
<PAGE>
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on
5
<PAGE>
any other class or classes, or series of the same or other
class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock
7
<PAGE>
may be issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time by vote of a majority of
the whole Board, provided, however, that the number of directors shall
not be reduced so as to shorten the term of any director at the time
in office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
8
<PAGE>
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
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Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered
for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article Fifteenth shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such
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business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) shall be required
to amend, alter or repeal any provision of Articles Fifth, Thirteenth,
Fifteenth or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
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ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations
as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such
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implementary Resolutions shall be suspended during such a disaster period until
it shall be determined by any interim Executive Committee acting under this
section that it shall be to the advantage of the Company to resume the conduct
and management of its affairs and business under all of the other provisions of
these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
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(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
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ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables
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<PAGE>
of the Company and for the keeping of proper records of the evidence of property
or indebtedness and of all the transactions of the Company. He shall have
general supervision of the expenditures of the Company and shall report to the
Board of Directors at each regular meeting of the condition of the Company, and
perform such other duties as may be assigned to him from time to time by the
Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary
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or Treasurer or an Assistant Secretary, and the seal of the corporation shall be
engraved thereon. Each certificate shall recite that the stock represented
thereby is transferrable only upon the books of the Company by the holder
thereof or his attorney, upon surrender of the certificate properly endorsed.
Any certificate of stock surrendered to the Company shall be cancelled at the
time of transfer, and before a new certificate or certificates shall be issued
in lieu thereof. Duplicate certificates of stock shall be issued only upon
giving such security as may be satisfactory to the Board of Directors or the
Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any
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<PAGE>
and all deeds, conveyances, assignments, releases, contracts, agreements, bonds,
notes, mortgages and all other instruments incident to the business of this
Company or in acting as executor, administrator, guardian, trustee, agent or in
any other fiduciary or representative capacity by any and every method of
appointment or by whatever person, corporation, court officer or authority in
the State of Delaware, or elsewhere, without any specific authority,
ratification, approval or confirmation by the Board of Directors or the
Executive Committee, and any and all such instruments shall have the same force
and validity as though expressly authorized by the Board of Directors and/or the
Executive Committee.
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<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
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(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
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EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 8, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
------------------------ ----------
Name of Bank
City
in the State of DELAWARE , at the close of business on June 30, 1997.
--------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins................ 208,942
Interest-bearing balances.......................................... 0
Held-to-maturity securities.......................................... 403,700
Available-for-sale securities........................................ 905,200
Federal funds sold and securities purchased under
agreements to resell................................................. 151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income........ 3,816,484
LESS: Allowance for loan and lease losses...... 54,535
LESS: Allocated transfer risk reserve.......... 0
Loans and leases, net of unearned income, allowance, and reserve... 3,761,949
Assets held in trading accounts...................................... 0
Premises and fixed assets (including capitalized leases)............. 95,762
Other real estate owned.............................................. 1,751
Investments in unconsolidated subsidiaries and associated companies.. 42
Customers' liability to this bank on acceptances outstanding......... 0
Intangible assets.................................................... 3,572
Other assets......................................................... 108,295
Total assets......................................................... 5,640,913
CONTINUED ON NEXT PAGE
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LIABILITIES
Deposits:
In domestic offices.................................................. 3,864,774
Noninterest-bearing .......................... 875,081
Interest-bearing.............................. 2,989,693
Federal funds purchased and Securities sold under agreements
to repurchase........................................................ 337,784
Demand notes issued to the U.S. Treasury............................. 95,000
Trading liabilities (from Schedule RC-D)............................. 0
Other borrowed money:................................................ ///////
With original maturity of one year or less........................ 775,000
With original maturity of more than one year...................... 43,000
Bank's liability on acceptances executed and outstanding............. 0
Subordinated notes and debentures.................................... 0
Other liabilities (from Schedule RC-G)............................... 84,197
Total liabilities.................................................... 5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus........................ 0
Common Stock......................................................... 500
Surplus (exclude all surplus related to preferred stock)............. 62,118
Undivided profits and capital reserves............................... 376,212
Net unrealized holding gains (losses) on available-for-sale
securities........................................................... (2,328)
Total equity capital................................................. 441,158
Total liabilities, limited-life preferred stock, and equity capital.. 5,640,913
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is Wilmington
Trust Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for
<PAGE>
money, to buy gold and silver bullion and foreign coins, to
buy and sell bills of exchange, and generally to use,
exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or
necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
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<PAGE>
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as
it may think fit and proper, and from time to time to vary
or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase,
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<PAGE>
hold, sell, assign, transfer, pledge, mortgage and convey
real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
4
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Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which,
5
<PAGE>
and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe
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for any unissued stock of any class or series or any additional
shares of any class or series to be issued by reason of any increase
of the authorized capital stock of the Corporation of any class or
series, or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time
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by vote of a majority of the whole Board, provided, however, that
the number of directors shall not be reduced so as to shorten the
term of any director at the time in office, and provided further,
that the number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice,
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(ii) the principal occupation or employment of such nominee and
(iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
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entitled to vote generally in the election of directors (considered
for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that
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<PAGE>
some lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to
any one or more of clauses (A) through (E) of paragraph 1 of
the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or
11
<PAGE>
otherwise, or (ii) the right to vote pursuant to any
agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter
or Act of Incorporation.
12
<PAGE>
Seventeenth: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
<PAGE>
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
2
<PAGE>
(B) The Executive Committee shall have all the powers of the Board
of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
4
<PAGE>
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as
5
<PAGE>
the Board of Directors may from time to time confer and direct. He shall also
exercise such powers and perform such duties as may from time to time be agreed
upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of
5
<PAGE>
Directors at appropriate times a report relating to the general condition and
internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any
7
<PAGE>
dividend, or to any allotment or rights, or to exercise any rights in respect of
any change, conversion or exchange of capital stock, or in connection with
obtaining the consent of stockholders for any purpose, which record date shall
not be more than 60 nor less than 10 days proceeding the date of any meeting of
stockholders or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses under
applicable law.
9
<PAGE>
(D) The rights conferred on any person by this Article X shall not
be exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 8, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------- --------------
Name of Bank
City
in the State of DELAWARE , at the close of business on June 30, 1997.
--------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins............... 208,942
Interest-bearing balances......................................... 0
Held-to-maturity securities.......................................... 403,700
Available-for-sale securities........................................ 905,200
Federal funds sold and securities purchased under agreements
to resell......................................151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income. 3,816,484
LESS: Allowance for loan and lease losses. 54,535
LESS: Allocated transfer risk reserve. 0
Loans and leases, net of unearned income,
allowance, and reserve............................................ 3,761,949
Assets held in trading accounts...................................... 0
Premises and fixed assets (including capitalized leases)............. 95,762
Other real estate owned.............................................. 1,751
Investments in unconsolidated subsidiaries and associated companies.. 42
Customers' liability to this bank on acceptances outstanding......... 0
Intangible assets.................................................... 3,572
Other assets......................................................... 108,295
Total assets......................................................... 5,640,913
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices................................................. 3,864,774
Noninterest-bearing ........ 875,081
Interest-bearing. 2,989,693
Federal funds purchased and Securities sold under agreements
to repurchase................................. 337,784
Demand notes issued to the U.S. Treasury............................ 95,000
Trading liabilities (from Schedule RC-D)............................ 0
Other borrowed money:............................................... ///////
With original maturity of one year or less...................... 775,000
With original maturity of more than one year.................... 43,000
Bank's liability on acceptances executed and outstanding............ 0
Subordinated notes and debentures................................... 0
Other liabilities (from Schedule RC-G).............................. 84,197
Total liabilities................................................... 5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus........................ 0
Common Stock......................................................... 500
Surplus (exclude all surplus related to preferred stock)............. 62,118
Undivided profits and capital reserves............................... 376,212
Net unrealized holding gains (losses) on available-for-
sale securities...................................................... (2,328)
Total equity capital................................................. 441,158
Total liabilities, limited-life preferred stock, and
equity capital....................................................... 5,640,913
2
Exhibit 25.3
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
SYMONS INTERNATIONAL GROUP, INC.
(Exact name of obligor as specified in its charter)
Indiana 35-1707115
(State of incorporation) (I.R.S. employer identification no.)
4720 Kingsway Drive
Indianapolis, Indiana 46205
(Address of principal executive offices) (Zip Code)
Symons International Group, Inc. Guarantee
with respect to Trust Preferred Securities
(Title of the indenture securities)
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ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 8th day
of September, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Donald G. MacKelcan By:/s/ Emmett R. Harmon
- ------------------------------ -----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
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EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington, County
of New Castle; the name of its resident agent is Wilmington Trust
Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains and
operates branch offices in the City of Newark, New Castle County,
Delaware, the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New
Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or
agencies of the government of the State of Delaware empowered to
confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to
the same extent as natural persons might or could do and in any part
of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for money,
to buy gold and silver bullion and foreign coins, to buy and
sell bills of exchange, and generally to use, exercise and
enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for
the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
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(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual
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owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
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(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on
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<PAGE>
any other class or classes, or series of the same or other
class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
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receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock
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may be issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time by vote of a majority of
the whole Board, provided, however, that the number of directors shall
not be reduced so as to shorten the term of any director at the time
in office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
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vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
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Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered
for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article Fifteenth shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such
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business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
12
<PAGE>
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) shall be required
to amend, alter or repeal any provision of Articles Fifth, Thirteenth,
Fifteenth or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
2
<PAGE>
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations
as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such
3
<PAGE>
implementary Resolutions shall be suspended during such a disaster period until
it shall be determined by any interim Executive Committee acting under this
section that it shall be to the advantage of the Company to resume the conduct
and management of its affairs and business under all of the other provisions of
these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
4
<PAGE>
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
5
<PAGE>
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables
6
<PAGE>
of the Company and for the keeping of proper records of the evidence of property
or indebtedness and of all the transactions of the Company. He shall have
general supervision of the expenditures of the Company and shall report to the
Board of Directors at each regular meeting of the condition of the Company, and
perform such other duties as may be assigned to him from time to time by the
Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary
7
<PAGE>
or Treasurer or an Assistant Secretary, and the seal of the corporation shall be
engraved thereon. Each certificate shall recite that the stock represented
thereby is transferrable only upon the books of the Company by the holder
thereof or his attorney, upon surrender of the certificate properly endorsed.
Any certificate of stock surrendered to the Company shall be cancelled at the
time of transfer, and before a new certificate or certificates shall be issued
in lieu thereof. Duplicate certificates of stock shall be issued only upon
giving such security as may be satisfactory to the Board of Directors or the
Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any
8
<PAGE>
and all deeds, conveyances, assignments, releases, contracts, agreements, bonds,
notes, mortgages and all other instruments incident to the business of this
Company or in acting as executor, administrator, guardian, trustee, agent or in
any other fiduciary or representative capacity by any and every method of
appointment or by whatever person, corporation, court officer or authority in
the State of Delaware, or elsewhere, without any specific authority,
ratification, approval or confirmation by the Board of Directors or the
Executive Committee, and any and all such instruments shall have the same force
and validity as though expressly authorized by the Board of Directors and/or the
Executive Committee.
9
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
10
<PAGE>
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
11
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 8, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
------------------------ ----------
Name of Bank
City
in the State of DELAWARE , at the close of business on June 30, 1997.
--------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins................ 208,942
Interest-bearing balances.......................................... 0
Held-to-maturity securities.......................................... 403,700
Available-for-sale securities........................................ 905,200
Federal funds sold and securities purchased under
agreements to resell................................................. 151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income........ 3,816,484
LESS: Allowance for loan and lease losses...... 54,535
LESS: Allocated transfer risk reserve.......... 0
Loans and leases, net of unearned income, allowance, and reserve... 3,761,949
Assets held in trading accounts...................................... 0
Premises and fixed assets (including capitalized leases)............. 95,762
Other real estate owned.............................................. 1,751
Investments in unconsolidated subsidiaries and associated companies.. 42
Customers' liability to this bank on acceptances outstanding......... 0
Intangible assets.................................................... 3,572
Other assets......................................................... 108,295
Total assets......................................................... 5,640,913
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices.................................................. 3,864,774
Noninterest-bearing .......................... 875,081
Interest-bearing.............................. 2,989,693
Federal funds purchased and Securities sold under agreements
to repurchase........................................................ 337,784
Demand notes issued to the U.S. Treasury............................. 95,000
Trading liabilities (from Schedule RC-D)............................. 0
Other borrowed money:................................................ ///////
With original maturity of one year or less........................ 775,000
With original maturity of more than one year...................... 43,000
Bank's liability on acceptances executed and outstanding............. 0
Subordinated notes and debentures.................................... 0
Other liabilities (from Schedule RC-G)............................... 84,197
Total liabilities.................................................... 5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus........................ 0
Common Stock......................................................... 500
Surplus (exclude all surplus related to preferred stock)............. 62,118
Undivided profits and capital reserves............................... 376,212
Net unrealized holding gains (losses) on available-for-sale
securities........................................................... (2,328)
Total equity capital................................................. 441,158
Total liabilities, limited-life preferred stock, and equity capital.. 5,640,913
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is Wilmington
Trust Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences of
debt, to receive deposits of money, or securities for
<PAGE>
money, to buy gold and silver bullion and foreign coins, to
buy and sell bills of exchange, and generally to use,
exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or
necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
2
<PAGE>
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as
it may think fit and proper, and from time to time to vary
or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase,
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<PAGE>
hold, sell, assign, transfer, pledge, mortgage and convey
real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
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<PAGE>
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which,
5
<PAGE>
and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article Fourth), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article Fourth), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article Fourth, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe
6
<PAGE>
for any unissued stock of any class or series or any additional
shares of any class or series to be issued by reason of any increase
of the authorized capital stock of the Corporation of any class or
series, or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time
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<PAGE>
by vote of a majority of the whole Board, provided, however, that
the number of directors shall not be reduced so as to shorten the
term of any director at the time in office, and provided further,
that the number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice,
8
<PAGE>
(ii) the principal occupation or employment of such nominee and
(iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
9
<PAGE>
entitled to vote generally in the election of directors (considered
for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that
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<PAGE>
some lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to
any one or more of clauses (A) through (E) of paragraph 1 of
the section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or
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<PAGE>
otherwise, or (ii) the right to vote pursuant to any
agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article Fifteenth on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter
or Act of Incorporation.
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Seventeenth: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
<PAGE>
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
2
<PAGE>
(B) The Executive Committee shall have all the powers of the Board
of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
4
<PAGE>
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as
5
<PAGE>
the Board of Directors may from time to time confer and direct. He shall also
exercise such powers and perform such duties as may from time to time be agreed
upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of
5
<PAGE>
Directors at appropriate times a report relating to the general condition and
internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any
7
<PAGE>
dividend, or to any allotment or rights, or to exercise any rights in respect of
any change, conversion or exchange of capital stock, or in connection with
obtaining the consent of stockholders for any purpose, which record date shall
not be more than 60 nor less than 10 days proceeding the date of any meeting of
stockholders or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses under
applicable law.
9
<PAGE>
(D) The rights conferred on any person by this Article X shall not
be exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 8, 1997 By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------- --------------
Name of Bank
City
in the State of DELAWARE , at the close of business on June 30, 1997.
--------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins............... 208,942
Interest-bearing balances......................................... 0
Held-to-maturity securities.......................................... 403,700
Available-for-sale securities........................................ 905,200
Federal funds sold and securities purchased under agreements
to resell......................................151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income. 3,816,484
LESS: Allowance for loan and lease losses. 54,535
LESS: Allocated transfer risk reserve. 0
Loans and leases, net of unearned income,
allowance, and reserve............................................ 3,761,949
Assets held in trading accounts...................................... 0
Premises and fixed assets (including capitalized leases)............. 95,762
Other real estate owned.............................................. 1,751
Investments in unconsolidated subsidiaries and associated companies.. 42
Customers' liability to this bank on acceptances outstanding......... 0
Intangible assets.................................................... 3,572
Other assets......................................................... 108,295
Total assets......................................................... 5,640,913
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices................................................. 3,864,774
Noninterest-bearing ........ 875,081
Interest-bearing. 2,989,693
Federal funds purchased and Securities sold under agreements
to repurchase................................. 337,784
Demand notes issued to the U.S. Treasury............................ 95,000
Trading liabilities (from Schedule RC-D)............................ 0
Other borrowed money:............................................... ///////
With original maturity of one year or less...................... 775,000
With original maturity of more than one year.................... 43,000
Bank's liability on acceptances executed and outstanding............ 0
Subordinated notes and debentures................................... 0
Other liabilities (from Schedule RC-G).............................. 84,197
Total liabilities................................................... 5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus........................ 0
Common Stock......................................................... 500
Surplus (exclude all surplus related to preferred stock)............. 62,118
Undivided profits and capital reserves............................... 376,212
Net unrealized holding gains (losses) on available-for-
sale securities...................................................... (2,328)
Total equity capital................................................. 441,158
Total liabilities, limited-life preferred stock, and
equity capital....................................................... 5,640,913
2
Exhibit 99.1
LETTER OF TRANSMITTAL
SIG CAPITAL TRUST I
OFFER TO EXCHANGE ITS
9 1/2% TRUST PREFERRED SECURITIES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ITS OUTSTANDING
9 1/2% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $1,000 PER TRUST PREFERRED SECURITY)
PURSUANT TO THE PROSPECTUS
DATED SEPTEMBER __, 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON ____________,
1997, UNLESS THE OFFER IS EXTENDED.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
WILMINGTON TRUST COMPANY
BY MAIL/OVERNIGHT DELIVERY/HAND:
Wilmington Trust Company
Corporate Trust Operation
Rodney Square North
100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Jill Rylee
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(302) 651-8869
FACSIMILE TRANSMISSIONS:
(302) 651-1079
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same
meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Preferred
Securities (as defined below) either if (i) Preferred Securities are to be
forwarded herewith or (ii) tenders of Preferred Securities are to be made by
book-entry transfer to an account maintained by Wilmington Trust Company (the
"Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the
procedures set forth under "The Exchange Offer--Procedures for Tendering
Preferred Securities" in the Prospectus and an Agent's Message (as defined
herein) is not delivered.
Holders of Preferred Securities whose certificates (the "Certificates")
for such Preferred Securities are not immediately available or who cannot
deliver their Certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date (as defined in the Prospectus) or who
cannot complete the procedures for book-entry transfer on or prior to the
Expiration Date, must tender their Preferred Securities according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for
Tendering Preferred Securities" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
<TABLE>
DESCRIPTION OF PREFERRED SECURITIES
<CAPTION>
<S> <C> <C> <C> <C>
LIQUIDATION NUMBER OF
LIQUIDATION AMOUNT OF BENEFICIAL
AMOUNT OF PREFERRED HOLDERS FOR
NAME AND ADDRESS PREFERRED SECURITIES WHICH
OF REGISTERED SECURITIES TENDERED (IF PREFERRED
HOLDER (PLEASE FILL CERTIFICATE (IF ALL ARE LESS THAN ALL SECURITIES ARE
IN IF BLANK) NUMBERS* TENDERED) ARE TENDERED)** HELD
$ $
$ $
$ $
TOTAL AMOUNT TENDERED: $ $
===================================== ============== ================ =================
</TABLE>
* Need not be completed by book-entry holders.
** Preferred Securities may be tendered in whole or in part in
denominations of $100,000 and integral multiples of $1,000 in excess
thereof, provided that if any Preferred Securities are tendered for
exchange in part, the untendered Liquidation Amount thereof must be
$100,000 or any integral multiple of $1,000 in excess thereof. All
Preferred Securities held shall be deemed tendered unless a lesser
number is specified in this column.
- --------------------------------------------------------------------------------
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (defined in Instruction 1)
ONLY)
o CHECK HERE IF TENDERED PREFERRED SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________________________________________
DTC Account Number ________________________________________________________
Transaction Code Number____________________________________________________
o CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED PREFERRED SECURITIES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder __________________________________________________
Window Ticket Number (if any)_______________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Name of Institution which Guaranteed Delivery_______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution_______________________________________________
DTC Account Number__________________________________________________________
Transaction Code Number_____________________________________________________
o CHECK HERE IF PREFERRED SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
AND NON- EXCHANGED OR UNTENDERED PREFERRED SECURITIES ARE TO BE RETURNED BY
CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
o CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE PREFERRED
SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER- DEALER") AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:_______________________________________________________________________
Address:____________________________________________________________________
Area Code and Telephone Number:_____________ Contact Person:_______________
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SIG Capital Trust I, a Delaware
business trust (the "Issuer"), and Symons International Group, Inc., an Indiana
corporation, as Depositor (the "Corporation"), the above-described aggregate
Liquidation Amount of the Trust's 9.5% Trust Preferred Securities (the
"Preferred Securities") in exchange for a like aggregate Liquidation Amount of
the Trust's 9.5% Trust Preferred Securities (the "Exchange Preferred
Securities") which have been registered under the Securities Act of 1933 (the
"Securities Act"), upon the terms and subject to the conditions set forth in the
Prospectus dated September __, 1997 (as the same may be amended or supplemented
from time to time, the "Prospectus"), receipt of which is acknowledged, and in
this Letter of Transmittal (which, together with the Prospectus, constitute the
"Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Preferred Securities tendered herewith in accordance with the
terms and conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment,), the undersigned hereby sells, assigns and transfers to or upon the
order of the Issuer all right, title and interest in and to such Preferred
Securities as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Corporation and the Issuer in connection with the Exchange Offer) with respect
to the tendered Preferred Securities, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), subject only to the right of withdrawal described in the Prospectus,
to (i) deliver Certificates for Preferred Securities to the Issuer together with
all accompanying evidences of transfer and authenticity to, or upon the order
of, the Issuer, upon receipt by the Exchange Agent, as the undersigned's agent,
of the Exchange Preferred Securities to be issued in exchange for such Preferred
Securities, (ii) present Certificates for such Preferred Securities for
transfer, and to transfer the Preferred Securities on the books of the Issuer,
and (iii) receive for the account of the Issuer all benefits and otherwise
exercise all rights of beneficial ownership of such Preferred Securities, all in
accordance with the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE PREFERRED
SECURITIES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE THE
ISSUER WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE
PREFERRED SECURITIES TENDERED HEREBY ARE TO SUBJECT TO ANY ADVERSE CLAIMS OR
PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL
DOCUMENTS DEEMED BY THE CORPORATION, THE ISSUER OR THE EXCHANGE AGENT TO BE
NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE
PREFERRED SECURITIES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ANY
OBLIGATIONS IT MAY HAVE UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED
HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name and address of the registered holder of the Preferred
Securities tendered hereby should be printed above, if they are not already set
forth above, as they appear on the Certificates representing such Preferred
Securities. The Certificate numbers and the Preferred Securities that the
undersigned wishes to tender should be indicated in the appropriate boxes above.
If any tendered Preferred Securities are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more
Preferred Securities than are tendered or accepted for exchange, Certificates
for such nonexchanged or untendered Preferred Securities will be returned (or,
in the case of Preferred Securities tendered by book-entry transfer, such
Preferred Securities will be credited to an account maintained at DTC), without
expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.
The undersigned understands that tenders of Preferred Securities
pursuant to any one of the procedures described under "The Exchange
Offer--Procedures for Tendering Preferred Securities" in the Prospectus and in
the instructions herein will, upon the Corporation's and the Issuer's acceptance
for exchange of such tendered Preferred Securities, constitute a binding
agreement between the undersigned, the Corporation and the Issuer upon the terms
and subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Corporation
and the Issuer may not be required to accept for exchange any of the Preferred
Securities tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Preferred
Securities be issued in the name of the undersigned or, in the case of a
book-entry transfer of Preferred Securities, that such Exchange Preferred
Securities be credited to the account indicated above maintained at DTC. If
applicable, substitute Certificates representing Preferred Securities not
exchanged or not accepted for exchange will be issued to the undersigned or, in
the case of a book-entry transfer of Preferred Securities, will be credited to
the account indicated above maintained at DTC. Similarly, unless otherwise
indicated under "Special Delivery Instructions" below, please deliver Exchange
Preferred Securities to the undersigned at the address shown below the
undersigned's signature.
3
<PAGE>
BY TENDERING PREFERRED SECURITIES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE
UNDERSIGNED IS NOT AN "AFFILIATE" OF THE CORPORATION OR THE ISSUER WITHIN THE
MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY EXCHANGE PREFERRED
SECURITIES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY
COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF EXCHANGE PREFERRED SECURITIES TO BE RECEIVED
IN THE EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE
UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION
(WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE PREFERRED
SECURITIES. BY TENDERING PREFERRED SECURITIES PURSUANT TO THE EXCHANGE OFFER AND
EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF PREFERRED SECURITIES WHICH IS
A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE
LETTERS ISSUED BY THE STAFF TO THE DIVISION OF CORPORATION FINANCE OF THE
SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH PREFERRED
SECURITIES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH
PREFERRED SECURITIES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS
A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER A PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE
REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH
EXCHANGE PREFERRED SECURITIES (PROVIDED THAT BY SO ACKNOWLEDGING AND BE
DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT
IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
THE CORPORATION AND THE ISSUER HAVE AGREED THAT, SUBJECT TO THE
PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE
AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING
BROKER-DEALER IN CONNECTION WITH RESALES OF EXCHANGE PREFERRED SECURITIES
RECEIVED IN EXCHANGE FOR PREFERRED SECURITIES, WHERE SUCH PREFERRED SECURITIES
WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD
ENDING 180 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER CERTAIN
LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH
EXCHANGE PREFERRED SECURITIES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING
BROKER-DEALER. IN THAT REGARD, SECURITIES HAVE BEEN DISPOSED OF BY SUCH
PARTICIPATING BROKER-DEALER. IN THAT REGARD, EACH PARTICIPATING BROKER-DEALER
WHO ACQUIRED PREFERRED SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING OR OTHER TRADING ACTIVITIES, BY TENDERING SUCH PREFERRED
SECURITIES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT
OF NOTICE FROM THE CORPORATION OR THE ISSUER OF THE OCCURRENCE OF ANY EVENT OR
THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY
REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE
PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN THE LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, OR OF THE OCCURRENCE
OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH
PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF EXCHANGE PREFERRED
SECURITIES PURSUANT OTHER PROSPECTUS UNTIL THE CORPORATION OR THE ISSUER HAS
AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION
AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE
PARTICIPATING BROKER-DEALER OR THE CORPORATION OR THE ISSUER HAS GIVEN NOTICE
THAT THE SALE OF THE EXCHANGE PREFERRED SECURITIES MAY BE RESUMED, AS THE CASE
MAY BE. IF THE CORPORATION OR THE ISSUER GIVES SUCH NOTICE TO SUSPEND THE SALE
OF THE EXCHANGE PREFERRED SECURITIES, IT SHALL EXTEND THE 180-DAY PERIOD
REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE
THE PROSPECTUS IN CONNECTION WITH THE RESALE OF EXCHANGE PREFERRED SECURITIES BY
THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING
OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL
HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO
PERMIT RESALES OF THE EXCHANGE PREFERRED SECURITIES OR TO AND INCLUDING THE DATE
ON WHICH THE CORPORATION OR THE ISSUER HAS GIVEN NOTICE THAT THE SALE OF
EXCHANGE PREFERRED SECURITIES MAY BE RESUMED, AS THE CASE MAY BE.
Holders of Preferred Securities whose Preferred Securities are accepted
for exchange will not receive accumulated Distributions on such Preferred
Securities for any period from and after the last Distribution date to which
Distributions have been paid or duly provided for on such Preferred Securities
prior to the original issue date of the Exchange Preferred Securities or, if no
such Distributions have been paid or duly provided for, will not receive any
accrued Distributions on such Preferred Securities, and the undersigned waives
the right to receive any interest on such Preferred Securities accrued from and
after such Distribution date or, if no such Distributions have been paid or duly
provided for, from and after August 15, 1997.
4
<PAGE>
All authority herein conferred or agreed to be conferred in this Letter
of Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
5
<PAGE>
================================================================================
HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 14)
(NOTE: SIGNATURES MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder exactly as name appears on
Certificates for Preferred Securities hereby tendered or on a security position
listing, or by any person authorized to become the registered holder by
endorsements and documents transmitted herewith (including such opinions of
counsel, certifications and other information as may be required by the
Corporation, the Issuer or the Exchange Agent to comply with the restrictions on
transfer applicable to the Preferred Securities). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
o
-------------------------------------------------------------------------------
o
-------------------------------------------------------------------------------
(SIGNATURE OF HOLDER)
Date , 1997
-------------------------
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
-----------------------------------------------------------
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
Tax Identification or Social Security Number
------------------------------------
GUARANTEE OF SIGNATURE
(SEE INSTRUCTIONS 2 AND 5)
o
------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date , 1997
--------------------------
Name of Firm
--------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
================================================================================
6
<PAGE>
================================================================================
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the Exchange Preferred Securities and/or any Preferred
Securities that are not tendered are to be issued in the name of someone other
than the registered holder of the Preferred Securities whose name appears above.
Issue
o Exchange Preferred Securities
o Preferred Securities
to:
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
Tax Identification or Social Security Number
------------------------------------
================================================================================
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the Exchange Preferred Securities and/or any Preferred
Securities that are not tendered are to be sent to someone other than the
registered holder of the Preferred Securities whose name appears above, or to
such registered holder at an address other than that shown above.
Mail
o Exchange Preferred Securities
o Preferred Securities
to:
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
Tax Identification or Social Security Number
------------------------------------
================================================================================
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth under "The
Exchange Offer--Procedures for Tendering Preferred Securities" in the Prospectus
and an Agent's Message is not delivered. Certificates, or book-entry
confirmation of a book-entry transfer of such Preferred Securities into the
Exchange Agent's account at DTC, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
herein on or prior to the Expiration Date. Tenders by book-entry transfer may
also be made by delivering an Agent's Message in lieu of this Letter of
Transmittal. The term "book-entry confirmation" means a confirmation of
book-entry transfer of Preferred Securities into the Exchange Agent's account at
DTC. The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the tendering
participant, which acknowledgment states that such participant has received and
agrees to be bound by the Letter of Transmittal (including the representations
contained herein) and that the Issuer and the Corporation may enforce the Letter
of Transmittal against such participant. Preferred Securities may be tendered in
whole or in part in the Liquidation Amount of $100,000 (100 Preferred
Securities) and integral multiples of $1,000 in excess thereof, provided that,
if any Preferred Securities are tendered for exchange in part, the untendered
Liquidation Amount thereof must be $100,000 (100 Preferred Securities) or any
integral multiple of $1,000 in excess thereof.
Holders who wish to tender their Preferred Securities and (i) whose
Preferred Securities are not immediately available or (ii) who cannot deliver
their Preferred Securities, this Letter of Transmittal and all other required
documents to the Exchange Agent on or prior to the Expiration Date or (iii) who
cannot complete the procedures for delivery by book-entry transfer on or prior
to the Expiration Date, may tender their Preferred Securities by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth under "The Exchange Offer--Procedures
for Tendering Preferred Securities" in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
(as defined below); (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Corporation
and the Issuer, must be received by the Exchange Agent on or prior to the
Expiration Date; and (iii) the Certificate (or a book-entry confirmation (as
defined in the Prospectus)) representing all tendered Preferred Securities, in
proper form for transfer, together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent within three New York Stock Exchange Inc.
trading days after the date of execution of such Notice of Guaranteed Delivery,
all as provided in "The Exchange Offer--Procedures for Tendering Preferred
Securities" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice. For
Preferred Securities to be properly tendered pursuant to the guaranteed delivery
procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or
prior to the Expiration Date. As used herein and in the Prospectus, "Eligible
Institution" means a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as "an eligible guarantor institution," including (as such terms
are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY ON OR
PRIOR TO THE EXPIRATION DATE.
Neither the Corporation nor the Issuer will accept any alternative,
conditional or contingent tenders. Each tendering holder, by execution of a
Letter of Transmittal (or facsimile thereof), waives any right to receive any
notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered
holder (which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as
the owner of the Preferred Securities) of Preferred Securities tendered
herewith, unless such holder has completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" above, or
8
<PAGE>
(ii) Such Preferred Securities are tendered for the account of
a firm that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Preferred Securities" is inadequate, the Certificate numbers
and/or the Liquidation Amount of Preferred Securities and any other required
information should be listed on a separate signed schedule which is attached to
this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Preferred
Securities will be accepted only in the Liquidation Amount of $100,000 (100
Preferred Securities) and integral multiples of $1,000 in excess thereof,
provided that if any Preferred Securities are tendered for exchange in part, the
untendered Liquidation Amount thereof must be $100,000 (100 Preferred
Securities) or any integral multiple of $1,000 in excess thereof. If less than
all the Preferred Securities evidenced by any Certificate submitted are to be
tendered, fill in the Liquidation Amount of Preferred Securities which are to be
tendered in the box entitled "Liquidation Amount of Preferred Securities
Tendered (If Less than all are Tendered)." In such case, a new Certificate for
the remainder of the Preferred Securities that were evidenced by your
Certificate for the Preferred Securities will be sent to the holder of the
Preferred Securities, promptly after the Expiration Date unless the appropriate
boxes on this letter of Transmittal are completed. All Preferred Securities
represented by Certificates delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Preferred Securities
may be withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be received by the Exchange Agent
at one of its addresses set forth above or in the Prospectus on or prior to the
Expiration Date. Any such notice of withdrawal must specify the name of the
person who tendered the Preferred Securities to be withdrawn, the aggregate
Liquidation Amount of Preferred Securities to be withdrawn, and (if Certificates
for Preferred Securities have been tendered) the name of the registered holder
of the Preferred Securities as set forth on the Certificates for the Preferred
Securities, if different from that of the person who tendered such Preferred
Securities. If Certificates for the Preferred Securities have been delivered or
otherwise identified to the Exchange Agent, then prior to the physical release
of such Certificates for the Preferred Securities, the tendering holder must
submit the serial numbers shown on the particular Certificates for the Preferred
Securities to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Preferred
Securities tendered for the account of an Eligible Institution. If Preferred
Securities have been tendered pursuant to the procedures for book-entry transfer
set forth under "The Exchange Offer-Procedures for Tendering Preferred
Securities," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Preferred Securities, in
which case a notice of withdrawal will be effective if delivered to the Exchange
Agent by written, telegraphic, telex or facsimile transmission on or prior to
the Expiration Date. Withdrawals of tenders of Preferred Securities may not be
rescinded. Preferred Securities properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at any
subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Procedures for
Tendering Preferred Securities."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Corporation and
the Issuer, in their sole discretion, whose determination shall be final and
binding on all parties. The Corporation and the Issuer, any affiliates or
assigns of the Corporation and the Issuer, the Exchange Agent or any other
person shall not be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. Any Preferred Securities which have been tendered
but which are withdrawn on or prior to the Expiation Date will be returned to
the holder thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder of the
Preferred Securities tendered hereby, the signature must correspond exactly with
the name as written on the face of the Certificates without alteration,
enlargement or any change whatsoever.
If any of the Preferred Securities tendered hereby are owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any tendered Preferred Securities are registered in different names
on several Certificates,it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Corporation and the Issuer, in their sole
discretion, of such person's authority to so act.
9
<PAGE>
When this Letter of Transmittal is signed by the registered holder of
the Preferred Securities listed and transmitted hereby, no endorsement of
Certificates or separate bond powers are required unless Exchange Preferred
Securities are to be issued in the name of a person other than the registered
holder. Signatures on such Certificates or bond powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder of the Preferred Securities listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
of the register holder appears on the Certificates, and also must be accompanied
by such opinions of counsel, certifications and other information as the
Corporation, the Issuer or the Exchange Agent may require in accordance with the
restrictions on transfer applicable to the Preferred Securities. Signatures on
such Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Preferred
Securities are to be issued in the name of a person other than the registered
holder, or if Exchange Preferred Securities are to be sent to someone other than
the registered holder or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Preferred Securities not exchanged will be returned by mail or,
if tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC unless the appropriate boxes on this Letter of Transmittal are
completed. See Instruction 4.
7. IRREGULARITIES. The Corporation and the Issuer will determine, in
their sole discretion, all questions as to the form of documents, validity,
eligibility (including time of receipt) and acceptance for exchange of any
tender of Preferred Securities, which determination shall be final and binding
on all parties. The Corporation and the Issuer reserve the absolute right to
reject any and all tenders determined by either of them not to be in proper form
or the acceptance of which, or exchange for, may, in the view of counsel to the
Corporation or the Issuer, be unlawful. The Corporation and the Issuer also
reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer set forth in the Prospectus under "The Exchange
Offer--Certain Conditions to the Exchange Offer" or any conditions or
irregularity in any tender of Preferred Securities of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders. The Corporation's and the Issuer's interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) will be final and binding. No tender of Preferred
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. The Corporation, the
Issuer, any affiliates or assigns of the Corporation, the Issuer, the Exchange
Agent, or any other person shall not be under any duty to give notification of
any irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUEST FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal
income tax law, a holder whose tendered Preferred Securities are accepted for
exchange is required to provide the Exchange Agent with such holder's correct
taxpayer identification number ("TIN") on the Substitute Form W-9 below. If the
Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Preferred
Securities exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31%of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Preferred Securities or of the last transferee appearing on the transfers
attached to, or endorsed on, the Preferred Securities. If the Preferred
Securities are registered in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
Certain holders (including, among others, corporations, financial
institutions and ceratin foreign person) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an
10
<PAGE>
exempt recipient by submitting a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. Please consult
the enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which holders are exempt from
backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLE CERTIFICATES. If any Certificates
representing Preferred Securities have been lost, destroyed or stolen, the
holder should promptly notify the Exchange Agent. The holder will then be
instructed as to the steps that must be taken in order to replace the
Certificates. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificates have been followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Preferred
Securities for exchange will not be obligated to pay any transfer taxes in
connection therewith. If, however, Preferred Securities are to be delivered to,
or are to be issued in the name of, any person other than the registered holder
of the Preferred Securities tendered, or if a transfer tax is imposed for any
reason other than the exchange of Preferred Securities in connection with the
Exchange Offer, then the amount of any such transfer tax (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
11
<PAGE>
================================================================================
PAYER'S NAME: Wilmington Trust Company
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT Social security
RIGHT AND CERTIFY BY SIGNING AND DATING number OR Employer
BELOW. Identification
Number
FORM W-9 __________________
- --------------------------------------------------------------------------------
Department of the Treasury Part 2 - CERTIFICATION - Under penalties of
Internal Revenue Service perjury, I certify that:
Payer's Request for (1) The number shown on this form is my
Taxpayer Identification correct Taxpayer Identification Number
Number (TIN) (or I am waiting for a number to be
issued to me) and
(2) I am not subject to backup withholding
either because: (a) I am exempt from
backup withholding, or (b) I have not
been notified by the Internal Revenue
Service (the "IRS") that I am subject
to backup withholding as a result of a
failure to report all interest or
dividends, or (c) the IRS has notified
me that I am no longer subject to
backup withholding.
- --------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS - You must cross Part 3 -
out item (2) above if you have been notified
by the IRS that you are currently subject Awaiting TIN o
to backup withholding because of under-
reporting interest or dividends on your
tax return. However, if after being notified
by the IRS that you are subject to backup
withholding, you received another notification
from the IRS that you are no longer subject
to backup withholding, do not cross out such
item (2).
THE INTERNAL REVENUE SERVICES DOES NOT
REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
SIGNATURE DATE
- ------------------------------------------- --------------------------------
NAME (Please Print)
------------------------------------------------------------
ADDRESS (Please Print)
------------------------------------------------------------
================================================================================
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND CONSENT
SOLICITATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
================================================================================
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature Date
---------------------------------------- ------------------------
Name (Please Print)
------------------------------------------------------------
Address (Please Print)
----------------------------------------------------------
================================================================================
12
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
TO BE USED IN CONNECTION WITH
SIG CAPITAL TRUST I
OFFER TO EXCHANGE ITS
9 1/2% TRUST PREFERRED SECURITIES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
9 1/2% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
================================================================================
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997 UNLESS THE OFFER IS EXTENDED
---------------
================================================================================
As set forth in the Exchange Offer (as defined below), this Notice of
Guaranteed Delivery, or one substantially equivalent to this form, must be used
to accept the Exchange Offer if (i) certificates for the Trust's (as defined
below) 9 1/2% Trust Preferred Securities (the "Preferred Securities") are not
immediately available, (ii) the Preferred Securities, the Letter of Transmittal
and all other required documents cannot be delivered to Wilmington Trust Company
(the "Exchange Agent") on or prior to the Expiration Date (as defined in the
Prospectus referred to below) or (iii) the procedures for delivery by book-entry
transfer cannot be completed on or prior to the Expiration Date. This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail, or
transmitted by facsimile transmission, to the Exchange Agent on or prior to the
Expiration Date. See "The Exchange Offer--Procedures for Tendering Preferred
Securities" in the Prospectus.
Wilmington Trust Company, Exchange Agent
By Mail, Hand or Overnight Delivery:
Wilmington Trust Company
Corporate Trust Operation
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Jill Rylee
Facsimile Transmission:
(302) 651-1079
Confirm By Telephone:
Jill Rylee: (302) 651-8869
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX OF THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SIG Capital Trust I, a Delaware
statutory business trust (the "Trust"), upon the terms and subject to the
conditions set forth in the Prospectus dated ____________, 1997 (as the same may
be amended or supplemented from time to time, the "Prospectus"), and the related
Letter of Transmittal (which together constitute the "Exchange Offer"), receipt
of which is hereby acknowledged, the aggregate liquidation amount of Preferred
Securities set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer--Procedures for
Tendering Preferred Securities."
Aggregate Liquidation
Amount Tendered:_____________________________________
Name of Registered Holder:___________________________
Address:_____________________________________________
_____________________________________________________
Certificate Nos.
(if available):______________________________________
Area Code and Telephone Number:______________________
Signature:___________________________________________
The undersigned understands that tenders of Preferred Securities will
be accepted only in liquidation amounts of $100,000 and integral multiples of
$1,000 in excess thereof.
If Preferred Securities will be tendered by book-entry transfer, provide the
following information:
DTC Account Number:____________________________
Date:____________________________, 1997
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agent Medallion Program, the New York Stock Exchange
Medallion Program or the Stock Exchange Medallion Program (an "Eligible
Institution"), hereby guarantees to deliver to the Exchange Agent, at its
address set forth above, either the Preferred Securities tendered hereby in
proper form for transfer, or confirmation of the book-entry transfer of such
Preferred Securities to the Exchange Agent's account at The Depository Trust
Company, pursuant to the procedures for book-entry transfer set forth in the
Prospectus, in either case together with one or more properly completed and duly
executed Letters of Transmittal (or facsimile thereof or Agent's Message (as
defined in the Letter of Transmittal in lieu thereof) and any other required
documents within three New York Stock Exchange trading days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letters of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and the
Preferred Securities tendered hereby (or a book-entry confirmation) to the
Exchange Agent within the time period set forth above and that failure to do so
could result in a financial loss to the undersigned.
Name of Firm:__________________________________________________________________
(Authorized Signature)_________________________________________________________
Title:
Address:_______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:________________________________________________
Date:__________________________________________________________________________
NOTE: DO NOT SEND PREFERRED SECURITIES WITH THIS NOTICE OF GUARANTEED DELIVERY.
ACTUAL SURRENDER OF PREFERRED SECURITIES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS.
3
Exhibit 99.3
[FORM OF EXCHANGE AGENCY AGREEMENT]
____________, 1997
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Re:
Ladies and Gentlemen:
____________, a ________ corporation, as Depositor (the "Company"), and
_________, a Delaware business trust (the "Trust"), hereby appoint Wilmington
Trust Company ("Wilmington Trust") to act as exchange agent (the "Exchange
Agent") in connection with an exchange offer by the Company and the Trust to
exchange up to $________ Capital Securities"). The terms and conditions of the
exchange offer are set forth in a Prospectus, dated________ ___, 1997 (as the
same may be amended or supplemented from time to time, the "Prospectus"), and in
the related Letter of Transmittal, which together constitute the "Exchange
Offer." The registered holders of the Capital Securities are hereinafter
referred to as the "Holders." Capitalized terms used herein and not defined
shall have the respective meanings described thereto in the Prospectus.
On the basis of the representations, warranties and agreements of the
Company, the Trust and Wilmington Trust contained herein and subject to the
terms and conditions hereof, the following sets forth the agreement among the
Company, the Trust and Wilmington Trust as Exchange Agent for the Exchange
Offer:
<PAGE>
1. APPOINTMENT AND DUTIES AS EXCHANGE AGENT.
a. The Company and the Trust hereby authorize Wilmington Trust to act
as Exchange Agent in connection with the Exchange Offer and Wilmington Trust
agrees to act as Exchange Agent in connection with the Exchange Offer. As
Exchange Agent, Wilmington Trust will perform those services as are outlined
herein, including, but not limited to, accepting tenders of Old Capital
Securities, and communicating generally regarding the Exchange Offer with
brokers, dealers, commercial banks, trust companies and other persons, including
Holders of the Old Capital Securities.
b. The Company and the Trust acknowledge and agree that Wilmington
Trust has been retained pursuant to this Agreement to act solely as Exchange
Agent in connection with the Exchange Offer, and in such capacity, Wilmington
Trust shall perform such duties in good faith as are outlined herein.
c. Wilmington Trust will examine each of the Letters of Transmittal and
certificates for Old Capital Securities and any other documents delivered or
mailed to Wilmington Trust by or for Holders of the Old Capital Securities, and
any book entry confirmations received by Wilmington Trust with respect to the
Old Capital Securities, to ascertain whether: (i) the Letters of Transmittal and
any such other documents are duly executed and properly completed in accordance
with the instructions set forth therein and that such book entry confirmations
are in due and proper form and contain the information required to be set forth
therein, (ii) the Old Capital Securities have otherwise been properly tendered,
(iii) Old Capital Securities tendered in part are tendered in Liquidation
Amounts of $100,000 (100 Capital Securities) and integral multiples of $1,000 in
excess thereof and that if any Old Capital Securities are tendered for exchange
in part, the untendered Liquidation Amount thereof is $100,000 (100 Capital
Securities) or any integral multiple of $1,000 in excess thereof, and (iv)
Holders have provided their correct Tax Identification Number or required
certification. Determination of all questions as to validity, form, eligibility
and acceptance for exchange of any Old Capital Securities shall be made by the
Company and the Trust, which determination shall be final and binding. In each
case where the Letters of Transmittal or any other documents have been
improperly completed or executed of where book-entry conformations are not in
due and proper form or omit certain information, or any of the certificates for
Old Capital Securities are not in proper form for transfer or some other
irregularity in connection with the tender or acceptance of the Old Capital
Securities exists, Wilmington Trust will endeavor, upon request of the Company
or the Trust, to advise the tendering Holders of the irregularity and to take
any other action as the Company or the Trust may request to cause such
irregularity to be corrected. Notwithstanding the above, Wilmington Trust shall
not be under any duty to give any notification of any irregularities in tenders
or incur any liability for failure to give any such notification.
d. With the approval of the Trust and the President, any Senior Vice
President, any Executive Vice President, any Vice President or the Treasurer or
any Assistant Treasurer of the Company, (such approval, if given orally, to be
confirmed in writing) or any other party designated by any such officer,
Wilmington Trust is authorized to waive any irregularities in connection with
any tender of Old Capital Securities pursuant to the Exchange Offer.
2
<PAGE>
e. Tenders of Old Capital Securities may be made only as set forth in
the Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer" and Old Capital Securities shall be considered properly tendered
only when tendered in accordance with such procedures set forth therein.
Notwithstanding the provisions of this paragraph, Old Capital Securities which
the Trust and the President, any Senior Vice President, any Executive Vice
President, any Vice President or the Treasurer, any Assistant Treasurer or any
other designated officer of the Company, shall approve (such approval, if given
orally, to be confirmed in writing) as having been properly tendered shall be
considered to be properly tendered.
f. Wilmington Trust shall advise the Company and the Trust with respect
to any Old Capital Securities received as soon as possible after 5:00 p.m., New
York City time, on the Expiration Date and accept its instructions with respect
to disposition of such Old Capital Securities.
g. Wilmington Trust shall deliver certificates for Old Capital
Securities tendered in part to the transfer agent for split-up and shall return
any untendered Old Capital Securities or Old Capital Securities which have not
been accepted by the Company and the Trust to the Holders promptly after the
expiration or termination of the Exchange Offer.
h. Upon acceptance by the Company and the Trust of any Old Capital
Securities duly tendered pursuant to the Exchange Offer (such acceptance if
given orally, to be confirmed in writing), the Company and the Trust will cause
New Capital Securities in exchange therefor to be issued as promptly as
practicable and Wilmington Trust will deliver such New Capital Securities on
behalf of the Company and the Trust at the rate of $100,000 (100 Capital
Securities) Liquidation Amount of New Capital Securities for each $100,000
Liquidation Amount of Old Capital Securities tendered as promptly as practicable
after acceptance by the Company and the Trust of the Old Capital Securities for
exchange and notice (such notice if given orally, to be confirmed in writing) of
such acceptance by the Company and the Trust. Unless otherwise instructed by the
Company or the Trust, Wilmington Trust shall issue New Capital Securities only
in denominations of $100,000 (100 Capital Securities) or any integral multiple
of $1,000 in excess thereof.
i. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and the conditions set forth in the Prospectus and the
Letter of Transmittal, Old Capital Securities tendered pursuant to the Exchange
Offer may be withdrawn at any time on or prior to the Expiration Date in
accordance with the terms of the Exchange Offer.
j. Notice of any decision by the Company and the Trust not to exchange
any Old Capital Securities tendered shall be given by the Company and the Trust
either orally (if given orally, to be confirmed in writing) or in a written
notice to Wilmington Trust.
k. If, pursuant to the Exchange Offer, the Company and the Trust do not
accept for exchange all or part of the Old Capital Securities tendered because
of an invalid tender, the occurrence of certain other events set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer" or otherwise, Wilmington Trust shall, upon notice
3
<PAGE>
from the Company and the Trust (such notice if given orally, to be confirmed in
writing), promptly after the expiration or termination of the Exchange Offer
return such certificates for unaccepted Old Capital Securities (or effect
appropriate book-entry transfer), together with any related required documents
and the Letters of Transmittal relating thereto that are in Wilmington Trust's
possession, to the persons who deposited such certificates.
l. Certificates for reissued Old Capital Securities, unaccepted Old
Capital Securities or New Capital Securities shall be forwarded by (a)
first-class certified mail, return receipt requested under a blanket surety bond
obtained by Wilmington Trust protecting Wilmington Trust, the Company and the
Trust from loss or liability arising out of the non-receipt or non- delivery of
such certificates or (b) by registered mail insured by Wilmington Trust
separately for the replacement value of each such certificate.
m. Wilmington Trust is not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, commercial
bank, trust company or other nominee or to engage or use any person to solicit
tenders.
n. As Exchange Agent, Wilmington Trust:
(i) shall have no duties or obligations other than those
specifically set forth herein or in the Prospectus or in the related
Letter of Transmittal;
(ii) will make no representations and will have no
responsibilities as to the validity, value or genuineness of any of the
certificates for the Old Capital Securities deposited pursuant to the
Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange
Offer;
(iii) shall not be obligated to take any legal action
hereunder which might in Wilmington Trust's reasonable judgment involve
any expense or liability, unless Wilmington Trust shall have been
furnished with indemnity satisfactory to it and additional fees for
taking of such action;
(iv) may reasonably rely on and shall be protected in acting
in reliance upon any certificate, instrument, opinion, notice, letter,
telegram or other document or security delivered to Wilmington Trust
and reasonably believed by Wilmington Trust to be genuine and to have
been signed by the proper party or parties;
(v) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its
due execution and validity and effectiveness of its provisions, but
also as to the truth and accuracy of any information contained therein,
which Wilmington Trust believes in good faith to be genuine and to have
been signed or represented by a proper person or persons acting in a
fiduciary or representative capacity;
4
<PAGE>
(vi) may rely on and shall be protected in acting upon written
or oral instructions from the President, any Senior Vice President, any
Executive Vice President, any Vice President, the Treasurer, any
Assistant Treasurer or any other designed officer of the Company;
(vii) may consult with its own counsel with respect to any
questions relating to Wilmington Trust's duties and responsibilities
and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted to
be taken by Wilmington Trust hereunder in good faith and in accordance
with the advice of such counsel; and
(viii) shall not advise any person tendering Old Capital
Securities pursuant to the Exchange Offer as to whether to tender or
refrain from tendering all or any portion of its Old Capital Securities
or as to the market value, decline or appreciation in market value of
any Old Capital Securities that may or may not occur as a result of the
Exchange Offer or as to the market value of the New Capital Securities.
Wilmington Trust shall furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery or such other forms
as may be approved from time to time by the Company and the Trust, to
all persons requesting such documents from Wilmington Trust. The
Company and the Trust will furnish you with copies of such documents at
your request.
o. Wilmington Trust shall advise orally and promptly thereafter confirm
in writing to the Company and the Trust and such other person or persons as the
Company and the Trust may request, daily (and more frequently during the week
immediately preceding the Expiration Date and if otherwise reasonably requested)
up to and including the Expiration Date, the aggregate principal amount of Old
Capital Securities which have been tendered pursuant to the terms of the
Exchange Offer and the items received by Wilmington Trust pursuant to the
Exchange Offer and this Agreement. In addition, Wilmington Trust will also
provide, and cooperate in making available to the Company and the Trust, or any
such other person or persons upon request (such request if made orally, to be
confirmed in writing) made from time to time, such other information in its
possession as the Company and the Trust may reasonably request. Such cooperation
shall include, without limitation, the granting by Wilmington Trust to the
Company and the Trust, and such person or persons as the Company and the Trust
may request, access to those persons on Wilmington Trust's staff who are
responsible for receiving tenders, in order to ensure that immediately prior to
the Expiration Date the Company and the Trust shall have received adequate
information in sufficient detail to enable the Company and the Trust to decide
whether to extend the Exchange Offer. Wilmington Trust shall prepare a final
list of all persons whose tenders were accepted, the aggregate principal amount
of Old Capital Securities tendered, the aggregate principal amount of Old
Capital Securities accepted and deliver said list to the Company and the Trust.
p. Letters of Transmittal, book-entry confirmations and Notices of
Guaranteed Delivery shall be stamped by Wilmington Trust as to the date and the
time of receipt thereof and shall be preserved by Wilmington Trust as to the
date and the time of receipt thereof and shall be preserved by Wilmington Trust
for a period of time at least equal to the period of time
5
<PAGE>
Wilmington Trust preserves other records pertaining to the transfer of
securities, or one year, whichever is longer, and thereafter shall be delivered
by Wilmington Trust to the Company and the Trust. Wilmington Trust shall dispose
of unused Letters of Transmittal and other surplus materials by returning them
to the Company or the Trust.
2. COMPENSATION.
$____ will be payable to Wilmington Trust in its capacity as Exchange
Agent; provided, that Wilmington Trust reserves the right to receive
reimbursement from the Company for any reasonable out-of-pocket expenses
incurred as Exchange Agent in performing the services described herein.
3. INDEMNIFICATION.
a. The Company and the Trust hereby agree to protect, defend, indemnify
and hold harmless Wilmington Trust against and from any and all costs, losses,
liabilities, taxes, expenses (including reasonable counsel fees and
disbursements) and claims imposed upon or asserted against Wilmington Trust on
account of any action taken or omitted to be taken by Wilmington Trust in
connection with its acceptance of or performance of its duties under this
Agreement and the documents related thereto as well as the reasonable costs and
expenses of defending itself against any claim or liability arising out of or
relating to this Agreement and the documents related thereto. This
indemnification shall survive the release, discharge, termination and/or
satisfaction of this Agreement. Anything in this Agreement to the contrary
notwithstanding, neither the Company nor the Trust shall be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of Wilmington Trust's bad faith, gross negligence or willful
misconduct. In no case shall the Company or the Trust be liable under this
indemnification agreement with respect to any claim against Wilmington Trust
until the Company and the Trust shall be notified by Wilmington Trust, by
letter, of the written assertion of a claim against Wilmington Trust or of any
other action commenced against Wilmington Trust, promptly after Wilmington Trust
shall have received any such written assertion or shall have been served with a
summons in connection therewith; provided, that, Wilmington Trust's failure to
give such notice shall not excuse the Company or the Trust from its obligations
hereunder. The Company and the Trust shall be entitled to participate at their
own expense in the defense of any such claim or other action, and, if the
Company and the Trust so elect, the Company or the Trust may assume the defense
of any pending or threatened action against Wilmington Trust in respect of which
indemnification may be sought hereunder with counsel reasonably acceptable to
Wilmington Trust; provided that the Company and the Trust shall not be entitled
to assume the defense of any such action if the named parties to such action
include the Company or the Trust and Wilmington Trust and representation of the
parties by the same legal counsel would, in the reasonable opinion of counsel
for Wilmington Trust , be inappropriate due to actual or potential conflicting
interests between them. In the event that the Company or the Trust shall assume
the defense of any such suit with counsel reasonably acceptable to Wilmington
Trust, the Company or the Trust, as applicable, shall not be liable for the fees
and expenses incurred by Wilmington Trust of any counsel retained by Wilmington
Trust subsequent to such assumption of defense by the Company or the Trust.
6
<PAGE>
b. The Company agrees to indemnify and hold harmless the Trust from and
against any and all losses, claims, damages and liabilities whatsoever, as due
from the Trust under this Section.
4. TAX INFORMATION.
The Company or the Trust shall arrange to comply with all requirements
under the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company and the Trust understand that they may be required,
in certain instances, to deduct 31% with respect to interest paid on the New
Capital Securities and proceeds from the sale, exchange, redemption or
retirement of the New Capital Securities from Holders who have not supplied
their correct Taxpayer Identification Number or required certification. Such
funds will be turned over to the Internal Revenue Service.
5. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
6. NOTICES. Any communication or notice provided for hereunder shall be in
writing and shall be given (and shall be deemed to have been given upon receipt)
by delivery in person, telecopy, or overnight delivery or by registered or
certified mail (postage prepaid, return receipt requested) to the applicable
party at the addresses indicated below:
If to the Company:
If to the Trust:
7
<PAGE>
If to Wilmington Trust:
Corporate Trust Operation
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Telecopier No.: (302) 651-1079
Attention: Jill Rylee
With a copy to:
Richards, Layton & Finger, P.A.
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Telecopier No.: (302) 658-6548
Attention: Bernard J. Kelley, Esquire
or, as to each party, at such other address as shall be designated by such party
in a written notice complying as to delivery with the terms of this Section.
7. PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement. Without
limitation to the foregoing, the parties hereto expressly agree that no holder
of Capital Securities shall have any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
8. COUNTERPARTS; SEVERABILITY. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each of
which when so executed shall be deemed an original, and all of such counterparts
shall together constitute one and the same agreement. If any term or other
provision of this Agreement or the application thereof is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the agreements contained herein is
not affected in any manner adverse to any party. Upon such determination that
any term or provision or the application thereof is invalid, illegal or
unenforceable, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the agreements contained
herein may be performed as originally contemplated to the fullest extent
possible.
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<PAGE>
9. CAPTIONS. The descriptive headings contained in this Agreement are included
for convenience or reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
10. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
This Agreement may not be amended or modified nor may any provision hereof be
waived except in writing signed by each party to be bound thereby.
11. TERMINATION. This Agreement shall terminate upon the earlier of (a) the 90th
day following the expiration, withdrawal, or termination of the Exchange Offer,
(b) the close of business on the date of actual receipt of written notice by
Wilmington Trust from the Company and the Trust stating that this Agreement is
terminated, (c) one year following the date of this Agreement, or (d) the time
and date on which this Agreement shall be terminated by mutual consent of the
parties hereto.
Kindly indicate your willingness to act as Exchange Agent and
Wilmington Trust's acceptance of the foregoing provisions by signing in the
space provided below for that purpose and returning to the Company a copy of
this Agreement so signed, whereupon this Agreement and Wilmington Trust's
acceptance shall constitute a binding agreement among Wilmington Trust, the
Company and the Trust.
Accepted and agreed to as of the date first written above:
WILMINGTON TRUST COMPANY
By:_________________________________
Name:
Title:
Very truly yours,
[NAME]
By:_________________________________
Name:
Title:
[NAME]
By:_________________________________
Name:
Title:
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